Research On The Avoidance Of Bai Hua M&A Risk By The Valuation Adjustment Mechanism

With the continuous adjustment of the market economic structure,enterprises are more inclined to integrate resources through capital means.As an important means for enterprises to optimize asset structure and improve operating efficiency,M&A frequently occurs in the capital market.Under the influence of the state's supply-side reform and the strategy of "transition mode,structure adjustment",the upsurge of corporate expansion and strategic transformation through M&A has followed.At the same time,the phenomenon of high valuation,high premium and high goodwill has become normal in the capital market.The overestimation of the value of the target enterprise and the uncertainty of risk assessment have always been unable to eradicate the two major problems in M&A,leading to the risk of M&A which Shows an increasingly complex trend.In order to reduce the risk of M&A,due to the characteristics that can restrict the behavior of the acquiree,the Valuation adjustment mechanism has been widely used in M&A.However,the situation that the performance of gambling is not up to standard and the performance compensation is not fulfilled has emerged endlessly.The resulting defects also have a negative impact on the performance of the acquirer.Whether the Valuation adjustment mechanism can effectively exert its adjusted valuation and reduce the information asymmetry in M&A,thereby avoiding the risks of M&A,is an issue that needs to be considered and resolved urgently.This article takes the case of cross-border M&A between Baihaucun and Huawei as the research object.Based on the information asymmetry theory,real option theory,and game theory,this paper analyzes the motivations and sorts out M&A.The process identified the risks of M&A from the three process links of proposal,organization,and integration.Starting from the two aspects of gambling results and performance,in-depth analysis of the evasion effect,it was found that the Valuation adjustment mechanism had very limited evasion effect on M&A risks,and combed the reasons for the poor evasion effect: blindly relying on the Valuation adjustment mechanism,the design of the Valuation adjustment mechanism had loopholes,Defective integration.Finally,a targeted optimization strategy for evading M&A risks is proposed: scientific planning of strategy before M&A,optimal design of Valuation adjustment mechanism during M&A,and use of Valuation adjustment mechanism to strengthen guidance and supervision after M&A.It is concluded that the Valuation adjustment mechanism as an unreliable hedgingmechanism for M&A risks,in the face of information asymmetry and future uncertainty in M&A activities,has promoted the high valuation of M&A and stimulated the high premium of M&A When the market environment and industry policies are volatile,the Valuation adjustment mechanism can not make up for the bubble formed by the high premium,which causes the acquirer to eventually suffer from "sequelae".Therefore,the Valuation adjustment mechanism should not be used as a risk tool when deciding on M&A,and it should be viewed rationally and dialectically.It is necessary to improve the efficiency of M&A from various aspects such as strategy,valuation,target setting,payment methods,and integration,and enhance the application effect of Valuation adjustment mechanism in the risk of M&A.The article enriches case studies related to Valuation adjustment mechanism and M&A risk management,provides decision-making reference for acquirer to sign Valuation adjustment mechanism,and has certain reference value for better avoiding M&A risks.It also provides contractual arrangements,transaction pricing and Risk control provides a direction for thinking.