Case Study On Performance Commitment Of Spearhead Merging D&S Culture

As an important mechanism to prevent inflated valuations of the underlying assets in material assets reorganization,performance commitments play an essential role in ensuring the rationality and fairness of the reorganization transactions.In recent years,performance commitment has been widely used and continues to heat up,which has become an inherent feature of the market-oriented development of listed companies' M&A and restructuring.However,with the concentrated expiration of performance commitments,the relative problems stand out,such as performance failures,performance changes after the end of the commitment period,a large amount of goodwill impairment dragging down the company's performance and so on.Therefore,how to reduce the financial and operating risks in mergers and acquisitions through reasonable valuation and effective design of performance commitments has become one of the important topics that both the theory and practice circles pay close attention to.This paper takes the performance commitment of Spearhead merging D&S Culture in 2014 as the research object.Through a combination of qualitative and quantitative methods,it comprehensively analyzes the components of the performance commitment and focuses on the analysis of the non-profit indicators,including its motivation,rationality and effectiveness.Besides,based on the perspective of options and finance,this paper discusses the rationality and effectiveness of two-way commitment arrangements.Then the paper evaluates the M & A performance during and after the commitment period by the means of event study and financial analysis.For further study,the DEA method is used to evaluate and compare the merger and acquisition efficiency among different samples,ten M & A events of the same period.The samples are sorted into three groups,non-performance commitment group,regular performance commitment group and the case in this paper so that the implementation effect of performance commitment can be evaluated.The main conclusions obtained from the analysis of this paper are as follows:(1)There are two design highlights in the performance commitments signed by Spearhead and D&S Culture;(2)The motivations for designing non-profit indicators are as follow: Reduce the derived risks from a single profit indicator,prevent the core resources from losing and improve the quality of promised performance.However,due to the unreasonable target value of the indicator,the sustainability of D&S Culture's performance is less than good;(3)Two-way performance commitment helps to rationalize the valuation,and brings Spearhead on the benefits of delayed payment and relief of financial pressure.However,the reward scheme without a cap has caused too high final paid premium.(4)Reorganizing D&S Culture with performance commitment produces positive short-term benefits and limited positive long-term effects.Spearhead's financial performance is stable during the post-merger commitment period,but declines after the end of the period.Non-profit indicators and two-way commitments play a positive role in the efficiency of mergers and acquisitions during the commitment period.According to the conclusion,this paper puts forward specific suggestions for the application and supervision of performance commitments,hoping to provide reference guidance on optimizing performance commitments for asset-light mergers and acquisitions to reduce performance non-compliance rate and improve the M & A performance.