Research On The Influence Of Performance Commitment Failure In Listed Company Mergers And Acquisitions

With the rapid growth of China's economy,market competition has become fiercer,in order to increase market share,increase enterprise competitiveness,and achieve diversified development among enterprises,mergers and acquisitions of listed companies have become a boom.Due to the excessively high valuation,the promise of high performance has been favored by many companies.With the advent of the performance commitment period,some companies have used performance commitment agreements to protect the interests of small and medium shareholders,but there are also companies whose mergers and acquisitions have failed to complete the agreed performance in time,resulting in disappointment.Most listed companies choose the income method for the valuation of the underlying assets.Performance commitment will also have a great impact on the valuation of this method.To a certain extent,the valuation of the underlying assets is exaggerated,making the underlying company to develop performance commitment.Under the background of "high valuation and high commitment" in the wave of corporate mergers and acquisition,taking single profit and profit as the constraint condition of performance commitment,there will inevitably be short-term behaviors promoted by seedlings,which will damage corporate value.But there are still some companies that are blinded by the huge benefits in front of them,without taking into account the hidden risks of high performance commitments,which ultimately leads to the failure of both parties to the merger and acquisition.Even if the M & A is successful,the high compensation or rewards entered into in the gambling agreement will also cause serious damage to the business performance of the enterprise.Failure in performance commitments has been common in recent years,once the high performance commitment is not completed,the performance and reputation of the merger will have serious consequences,and there is a significant risk of impairment of high goodwill.Therefore,the analysis of the impact of performance commitment on corporate M&A activities is a worthy research direction.In order to deeply analyze the impact of the performance promises on the mergers and acquisitions,this article takes the Huanghe Whirlwind M&A Shanghai Mingjiang as an example,based on real option theory,information transfer theory,and M&A valuation theory,relevant M&A data was collected and summarized.Used data via trend analysis and comparative analysis,we explored the various adverse effects ofShanghai Mingjiang's unsatisfactory performance commitments on the merger and acquisition company.In the research process,we tried to eliminate the impact of other factors on the merger and acquisition company,and focused on the analysis of the impact of unsatisfactory performance commitments on the financial performance of the merger and acquisition company,including the profitability,debt solvency,operating capacity,and growth capacity;calculating market performance analysis on the effectiveness of the merger and acquisition company influences.The discovery not only led to the impairment of goodwill and the evaporation of market value,but also caused the long-term negative effects of the Huanghe Whirlwind,which caused a negative impact on the social reputation of the Huanghe Whirlwind.Through the analysis of the case,this article believes that the reason why Shanghai Mingjiang 's performance promise was lost was that during the merger and acquisition process,too optimistic valuation resulted in too high target valuation;irrational consideration of radical performance commitment basis,in order to realize the predicted profit,the wholly-owned subsidiaries in the merger and acquisition can avoid compensation,which existed earnings management behavior,confirmed income in advance.After the merger and acquisition,the Huanghe Whirlwind 's integration was not in place.The combined effect of these aspects led to the outbreak of disappointment.In order to avoid the loss of performance promises,the target company must first make a reasonable performance commitment,and mergers and acquisitions rationally view performance commitments,pay attention to the integration of post-merger business to enhance corporate value,strengthen risk management and control,perfect relevant laws,regulations and regulatory systems in order to improve the completion rate of performance commitments and enable companies to better complete mergers and acquisitions.