Research On The Risks And Its Countermeasures Of Cross-border Mergers And Acquisitions Of Xinrihengli

With China’s economic development entering a new normal,the development of traditional manufacturing industry has a bottleneck period and cross-border M & A has gradually become an important means of transformation of traditional enterprises in China.Cross-border M & A is also an important type of M & a market in China.In recent years,however,the number and scale of cross-border M & A transactions have declined.This is related to the strengthening of the supervision by the regulatory authorities while cross-border M & A has many shortcomings.Cross border M & A is described from the characteristics of the object of M & A,emphasizing the M & A activities in different industries between the acquirer and the acquiree,which is generally a means of corporate diversification strategy and can also achieve synergy effect to a certain extent.However,due to the fact that the company has entered a previously unfamiliar field,there is a certain information asymmetry problem.In this case,the synergy effect of cross-border M & A is often more difficult to achieve,and its special risks are also exposed.How to identify the risk of cross-border M & A and take precautions as soon as possible is of great significance to the transformation and development of Listed Companies in China.In order to have an insight into the risks in cross-border M & A activities,and thus to put forward the preventive and response measures that can be used for reference,this paper mainly adopts the method of case study,taking the case of Xinrihengli’s cross-border M & A as the research object.Through analyzing the causes of different risks in the case,the paper puts forward specific suggestions from multiple subjects for each risk.Xinrihengli once acquired 80% of the equity of Boya stem cells at a premium rate of 21 times but lost control finally.The case of Xinrihengli cross-border M & A is a typical representative of the case of cross-border M & A with many huge risks.In the part of risk analysis,based on the time process,this paper classifies the risks into strategic adaptability risk,financial risk and integration risk.Financial risk can be divided into valuation risk,financing payment risk and performance commitment risk.Then,combined with the case of Xinrihengli,it analyzes the causes and performances of each kind of risk in the case in detail.The strategic adaptability risk of Xinrihengli is mainly caused by the company’s eagerness to merge and do not make detailed planning for the two companies’ strategy.In terms of financial risk,the risk of over-valuation mainly comes from the fact that the management of Xinrihengli fails to be cautious and the evaluation method is inappropriate.The risk of high performance commitment is mainly caused by the single and inelastic existing performance commitment indicators.The risk of financing payment is mainly caused by the requirements of the acquired firm,the over-valuation and the lack of appropriate financing system.The causes of integration risk are mainly due to Xinrihengli’s neglect of integration,the failure of Soochow securities as an external independent financial consultant to play its due supervisory role,and the lack of integrity of the acquired party.Then,this paper analyzes the negative impact of cross-border M & A risks on the company,so as to explain the importance and necessity of prevention.Finally,according to the causes of different risks,this paper puts forward specific prevention suggestions.For the prevention of strategic adaptive risk,the acquirer should make a rational decision on cross-border M & A and find the right target company and the government should also strengthen the policy support to guide the rational and healthy development of cross-border M & A.In view of the prevention of valuation and pricing risks,enterprises should make prudent valuation and guard against the occurrence of excessive premium in cross-border M & A.Evaluation agencies should also reasonably choose the evaluation methods for the acquiree and fully disclose the relevant risks.For the prevention of performance commitment risk,the acquirer needs to establish a diversified performance commitment system that constantly adapts to the environment.In response to the risk of financing payment,the acquirer can adopt a variety of payment methods when conducting cross-border M & A.At the same time,the acquirer should be cautious about related party borrowing from subsidiary in the commitment period.And the government should also improve the corresponding cross-border M & A financing system.For the prevention of integration risk,enterprises should strengthen cross-border integration to achieve strategic coordination.And intermediary agencies should pay due attention to the issues after cross-border M & A and achieve continuous supervision.The government should also improve the legal system and strengthen the government’s supervision of cross-border M & A process.