Research On The Prevention Of M&A Risk By The Valuation Adjustment Mechanism

With the continuous development of China's economy and the growth of the capital market,mergers and acquisitions have become a means for enterprises to seek development and financing channels.M&A activities of listed companies occur frequently,but with these mergers and acquisitions,there brings huge risk.In particular,the valuation risk caused by the uncertainty of the valuation of the target company and the lack of integration in the latter stage lead to the integration risk of the merger and the failure.As a form of contract,the Valuation Adjustment Mechanism came into being,aiming at solving the problem of information asymmetry in the transaction process,narrowing the cognitive gap between the two parties,and thus improving the possibility of successful mergers and acquisitions.In order to avoid these merger risks and improve the success rate of mergers and acquisitions,the acquirer is more and more generally signing a valuation adjustment mechanism agreement at the time of merger and acquisition.However,the actual data shows that the cases of valuation adjustment mechanism failures abound,the performance promises in the mergers and acquisitions are not up to standard,the arbitrarily change the compensation method,the refusal to fulfill the promises,etc.,and the effect of the valuation adjustment mechanism agreement on preventing the risk of mergers and acquisitions does not seem to be very good.Reflected.Therefore,it is of practical significance to study whether and how the valuation adjustment mechanism agreement can effectively prevent the risk of mergers and acquisitions.This paper adopts the case study method,taking the Blue Focus Communication Group Co.,Ltd,which is a typical company that frequently uses the Valuation Adjustment Mechanism in M&A activities,selects two mergers and acquisitions events,combines the theory of valuation adjustment mechanism agreement and the domestic and foreign scholars' valuation adjustment mechanism agreement.The research analyzes the effectiveness of the valuation adjustment mechanism agreement against M&A risk from three aspects: the identification of M&A risks at different stages,the completion of the target company's performance,and the design of the terms of the valuation adjustment mechanism agreement.Research shows that the valuation adjustment mechanism agreement can prevent the risk of mergers and acquisitions at different stages to a certain extent.When enterprises choose the valuation adjustment mechanism agreement as a risk prevention tool,they must first consider the scope of application of the valuation adjustment mechanism agreement,because there are risks in the valuation adjustment mechanism agreement itself.Secondly,the risk prevention should be realized through reasonable clause design.