Research On Enterprise M & A Risk Based On Performance Commitment

With the continuous development of China's economy,the market competition has become more and more intense,more and more enterprises choose to expand through mergers and acquisitions to enhance market competitiveness.In 2018,China's M & A market has completed 28,567 restructuring transactions,with a total transaction value of 4,699.4 billion yuan,which indicates that the M & A and restructuring market has always maintained an active state and will continue to develop in the future.However,as the scale of mergers and acquisitions continues to expand,the risks associated with mergers and acquisitions are gradually exposed,many enterprises in mergers and acquisitions tend to choose to introduce performance commitment mechanism to avoid possible risks to protect the interests of investors.However,as the number of performance commitments increased,the phenomenon of performance commitments can not meet the standards gradually increased,which shows that the performance commitment in the prevention and control of risk series of risks.Therefore,how to identify the risk of performance commitment in mergers and acquisitions,and carry out effective risk prevention and control has become a real problem that needs to be solved urgently.In this paper,combined with Donly's case of acquiring the Everich Supply Chain,the acquisition process is divided into three stages using the HHM framework: before,during and after the setting of the performance commitment,the risk of the performance commitment in the merger and acquisition is classified according to the different nature,and the effective prevention and control measures are put forward from the perspective of the merger and acquisition party and the regulator.In order to improve the future enterprises in the use of performance commitments to avoid risks.This paper finds that the performance commitment exists in the whole process of merger and acquisition,and its effect is accompanied by the risk of merger and acquisition.In the M& A preparation phase before the performance commitment is set,the merger management tends to choose the subject matter of the merger with the performance commitment because of the risk appetite,ignoring its own value and thus increasing the selection risk of the subjectmatter.In the performance commitment setting,the over-optimism of the underlying enterprise management about future profitability will lead to excessive risk of performance targets,and the dual role of information asymmetry and high performance commitment will further enhance valuation risk.After the performance commitment is set,the high performance commitment will bring great operational pressure to the underlying enterprise,when the real profitability is difficult to complete the performance commitment,management will choose to use performance fraud and other ways to avoid compensation,while the performance commitment can not be achieved will trigger the risk of goodwill impairment,so that listed companies into financial difficulties.Therefore,before introducing a performance commitment,both parties need to weigh the pros and cons,and use effective risk precautions to avoid the risks that may arise,in order to improve the success rate of the performance commitment in the merger.