Study On The Performance Of Bohai Leasing's Acquisition Of Irish Avolon Company

With the development of economic globalization and the continuous promotion of "One Belt And One Road" construction,more Chinese enterprises enter the entry international market and actively invest aboard.Transnational mergers and acquisitions have become an important way for Chinese enterprises to make the foreign direct investment.Compared with greenfield investment,it can realize the global layout of enterprises more quickly and effectively.Besides,in 2015,the national council of China issued the guidance on accelerating the development of the financial leasing industry,which requires the financial leasing industry to focus on the main leasing industry,expand the overseas market,and develop cross-border leasing.The government is also actively helping financial institutions with an aircraft leasing business to conduct cross-border mergers and acquisitions and provide financing channels for them.The cross-border m&a activities of Chinese enterprises are increasingly frequent,but the success rate still needs to be improved.The failure of transaction negotiation,high premium m&a,and integration difficulties after m&a are still frequent cases.For enterprises,the success or failure of their cross-border m&a activities not only relate to the realization of the strategic objectives of the enterprises but also affects the share price and the interests of shareholders.Therefore,it is of great significance to analyze the performance of crossborder mergers and acquisitions of enterprises and summarize their experience or lessons for future investment activities of Chinese enterprises.At present,there are few mergers and acquisitions in the leasing industry in China,and the related researches and reference cases are limited.Therefore,this paper takes the acquisition of Irish Avolon aircraft leasing company by Bohai Leasing as a case study from which implications could apply to prospective international mergers of Chinese leasing enterprises in practice.The classic part of this case is that Bohai Leasing is the first a-share listed leasing company in China.It achieved great-leap-forward development in the aircraft business through the acquisition of Avolon and became the largest leasing company in China.After the acquisition of Avolon,Bohai Leasing ranked the 10 th in the global aircraft leasing industry and became one of the top three in the world.This paper conducts a quantitative analysis of the stock and financial data of Bohai Leasing by integrating the event study method and the financial ratio analysis method.Firstly,the short-term performance of the acquisition is analyzed by an event study method,and the results show that the accumulative excess return rate of Bohai Leasing stocks is increasing during the event window period;Secondly,the financial index analysis method is used to compare the long-term financial performance of Bohai Leasing in the three years before and after the merger.The Du Pont analysis method is applied to calculate the main financial indicators of Bohai Leasing of which the four abilities of profitability,debt repayment,operation,and growth are evaluated.Through the performance analysis of Bohai Leasing's acquisition of Avolon,this paper finds that the acquisition brings positive shareholder effect to Bohai Leasing,earning short-term benefits to its shareholders and enhancing the profitability of Bohai Leasing in its main business.Although Bohai Leasing has increased its debt,its financial performance has been improved after the acquisition due to the stable cash flow brought by its main leasing business and a certain guarantee of its solvency.According to the comprehensive performance analysis results,the acquisition of Avolon has indeed created value for Bohai Leasing.At the same time,based on the analysis of the successful crossborder m&a case,the paper sums up some experience for reference:To complete a successful cross-border m&a,enterprises must choose the appropriate acquisition object and make sufficient preparations;The strategy should be adjusted timely according to the actual situation the process of m&a;After the completion of mergers and acquisitions,enterprises should effectively integrate various resources.