| As of September 30 2019,a total of 2138 listed companies in the China A-shares market had goodwill,as well as the business reputation,on their accounting records.The total amount of goodwill is about 1.4 trillion,and there are up to 48 listed companies with goodwill accounting for more than 70% of net assets value,and the risk of goodwill impairment has reached to an unprecedented height.Goodwill occurs during the process of mergers and acquisitions.The original intention of goodwill is to ensure that the target firm is acquired at a reasonable price.However,with the surge of domestic mergers and acquisitions,the market is generally optimistic about the transformation of corporate mergers and acquisitions,leading to mergers and acquisitions of enterprises often accompanied by a large influx of capital and the rise of stock prices.Especially in the fast-growing mobile Internet industry,due to the huge market potential and sufficient demographic dividends,mergers and acquisitions and their subsequent reorganizations between companies are more frequent than those in other industries.Because most of the cases of mergers and acquisitions in the mobile Internet industry are cross-industry,the companies on both sides were not in the same industry before the merger and acquisition.Therefore,there will be a greater risk of information asymmetry in mergers and acquisitions.At the same time,when merging and acquiring the mobile internet companies,due to the small number of high-quality target companies,the successful bidders in the market generally occupy a certain bargaining advantage.And the mobile internet companies themselves are asset-light industries,which ultimately resulted in a large premium for the merge and acquisition of mobile internet companies.Consequently,the high premium part has brought about the formation of huge goodwill.When evaluating the value of mobile internet companies,most of the scholars and researchers ultimately use the income method for valuation,that is,applying the future profit forecast of the target firm,which also causes the value of goodwill generated during mergers and acquisitions to decrease when the target company's future profitability fluctuates.Correspondingly,the risk of impairment of goodwill will also bring huge economic losses to listedcompanies.In the game of goodwill impairment risk prevention strategy,the Valuation Adjustment Mechanism is gradually becoming familiar and used by enterprises.Valuation Adjustment Mechanism is a risk prevention strategy,which regulates the risks that may occur in the future,or the conditions that need to be met,through contractual methods.Regarding as the main research issue,this article mainly focuses on the prevention of the risk of goodwill impairment,and takes the Valuation Adjustment Mechanism as an entry point to prove that the reasonable use of the Valuation Adjustment Mechanism can achieve a certain degree of inhibition on the goodwill impairment risk.It first explains the background and significance of related research,and then summarizes the relevant theories and overviews of both Valuation Adjustment Mechanism and the risk of goodwill impairment,providing a theoretical foundation for the subsequent case analysis.In the case analyzing section,the case events are first sorted out,and then the cause of the goodwill impairment risk of the merger and acquisition event is analyzed theoretically.At the same time,the application of the Valuation Adjustment Mechanism in risk prevention is explained and combined with relevant data to verify.Finally,this paper put forward some suggestions for the optimization of the setup of Valuation Adjustment Mechanism for this merger and acquisition.In conclusion,this article aims to better identify the risk of goodwill impairment for participants in the mergers and acquisitions market,and at the same time,it aims at using the Valuation Adjustment Mechanism to effectively prevent risks and promote the orderly development of the mergers and acquisitions market. |
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