Research On Valuation Risk Of Merging Light-asset Enterprises With Performance Commitment

Nowadays,the overall volume of M&A in China is on the rise.In addition,with the national policy supporting to the Internet and cultural industry,related light-asset enterprises relying on their high growth and high earnings become the conglomerating M&A target of many traditional enterprises,so as to realizing the adjustment of industrial structure and increase of market value.On the other hand,with the gradual maturity of the M&A market,performance commitment has been used as a method of valuation adjustment to avoid the valuation risk in the M&A market.However,with the expiring of the commitment which was signed in M&A flourish period in recent years,the rates of unsuccessful performance commitment and earnings management are significantly increased,which brings higher valuation risk instead.What's more notable is that cases with taking light-asset enterprises as the merging target are the majority of unsuccessful commitment cases,and the proportion has a tendency to increase.The core research issue of the paper is: valuation risk generation path of merging light-asset enterprises with performance commitment.The paper finds out that the characteristics of light-asset enterprises will lead to the valuation risk and inappropriate application of performance commitments will also exacerbate the risk.There are abundant researches in the existing fields on the valuation risk generated by light-asset enterprises valuation and performance commitment usage respectively,but there are few researches on the combination and interaction of the two factors.Based on this literature deficiency,the paper use case analysis method to analyze the case of SACE merging U9 TIME.It's a typical case in which purchaser mergers light-asset enterprise for industrial transformation and fall in the end with huge losses though signing performance commitment,it has outstanding research and analysis value.The paper breaks through the limitation of the existing research with the single perspective,researching the path of valuation risk generation and amplification effect between the two different dimensions of light-asset enterprises and performance commitment in a new way.The research finds out setting performance commitment can increase valuation risk of merging light-asset enterprises and create a circular expanding effect.Based on the path,the paper further constructs the prevention and control system of valuation risk.The conclusion of the paper will have a positive reference value and practical significance for the case in current M&A market which merging light-asset enterprises with increasingly general usage of performance commitment.The conclusion can also reasonably warn and eliminate potential valuation risk in order to realize effective prevention and control the risk for improving the success rate of M&A.