Research On The Failure Of Performance Commitment Agreement In Enterprise Mergers And Acquisitions

Since 2014,China's capital market has set off a wave of mergers and acquisitions.High-premium mergers and acquisitions are common.Behind the high-premium mergers that are several times higher are the high performance commitments of the acquiree.The performance commitment period is usually three to five years.Now the targets of mergers and acquisitions have successively entered the performance cashing period,and the sequelae of mergers and acquisitions continue to appear.Many companies are in a dilemma because the performance of the target of mergers and acquisitions is not up to standard.The phenomenon of public halls also happens from time to time.Frequent cases of performance commitment failures and failure to implement performance compensation payments are issues that companies need to pay close attention to when applying performance commitment agreements in mergers and acquisitions,and are also a topic that needs to be researched in the current theoretical and practical circles.Based on this background,this article selects a typical case of performance failure agreement in the acquisition of Waterma by Jianrui Woneng.Through the analysis of this case,the reason for the failure of the performance commitment agreement and its adverse effects are explored.Problems existing in the application of performance commitment agreements in mergers and acquisitions and suggestions for improvement.This article uses case analysis to study the reasons for the failure of performance commitment agreements in corporate mergers and acquisitions and their impact.First of all,the related research of the predecessors is sorted out,and the theoretical basis used in the case analysis part of this article is introduced.Secondly,it introduces the basic situation of the parties to the merger and acquisition,the real motivation for signing the performance commitment agreement in this merger,the relevant arrangements of the performance commitment agreement,and the realization of the final performance commitment.Based on the theoretical basis,it analyzes the reasons for the failure of performance commitment and the disadvantages caused.influences.The study found that there are three main reasons why the performance commitment agreement failed in this case:(1)Preliminary analysis shows that due to the impact ofnew energy vehicle subsidy policies,Waterma's business model has encountered challenges and product competitiveness The continuous decline has affected the daily operations of enterprises.(2)Further analysis can find the internal causes of the failure of the performance commitment agreement,that both parties of the merger and acquisition are too optimistic before and after the merger,underestimating the risks faced by Waterma.The evaluation value of the underlying assets before the merger and acquisition is too high;unreasonable performance commitments were formulated during the merger and acquisition;after the merger and acquisition,they expanded blindly in order to complete the performance commitments.These three aspects are the most important reasons for the failure of the performance commitment agreement.(3)The failure of the performance commitment agreement is also related to the imperfection of the performance commitment supervision system.The failure of this performance commitment agreement has adversely affected the M & A party,the merged party,and small and medium investors.It can be said that the performance commitment agreement that emerged as a protection mechanism did not play a protective role in this merger.Finally,based on this case and the current situation of China's mergers and acquisitions,it summarizes the existing problems in the application of performance commitment agreements,and puts forward corresponding suggestions :(1)The merger should carefully review the merger target enterprise qualifications to avoid over-reliance on performance commitments;(2)The merged party must correctly assess its own value,and make reasonable performance commitments;(3)Regulatory agencies must continuously improve performance commitment agreements relevant systems,on the one hand,strengthen the supervision of the information disclosure of the target company,on the other hand,they pay attention to the authority of performance compensation.Through this case study,it is hoped that it can provide some experience and suggestions to other companies that adopt performance commitment agreements in M & A transactions,reduce the risk of failure of performance commitment agreements,and enable performance commitment agreements to better serve M & A activities.