Analysis And Suggestions On Financial Risk For HNA Group’s Oversee M＆A

With the continuous development of Chinese enterprises,internationalization strategy has become a choice for many enterprises.Under "the belt and road",more and more Chinese enterprises choose to carry out overseas mergers and acquisitions（“M＆A”）.In recent years,the amount of single project of overseas mergers and acquisitions Chinese enterprise involved becomes larger and larger,and more and more industries covered.However,overseas mergers and acquisitions will accompany with more financial risks than domestic mergers and acquisitions.Due to the particularity of overseas mergers and acquisitions,enterprises have to handle more financial risks in terms of valuation,financing,payment and integration.In the second half of 2017,many Chinese enterprises broke out financial risks such as liquidity shortage and debt default because of the radical process of overseas M＆A before,among witch HNA Group（“HNA” or “the Group”）is particularly representative.This paper studies four overseas mergers and acquisitions of HNA Group from 2014 to 2017,revealing the financial risks in the process according to the risk management theory and the financial risk theory,analyzing the specific causes of financial risks,and putting forward corresponding measures.In this way,it can provide some reference for Chinese enterprises who want to carry out overseas M＆A in the future,and make some contribution to the internationalization of Chinese enterprises.The theoretical basis of this paper mainly includes valuation theory,financing priority theory,leveraged M＆A theory,etc.It summarizes the problems of HNA Group’s overseas M＆A,such as high valuation,high leveraged financing,full cash payment and lack of effective financial integration.As a result,after a series of overseas M＆A,HNA Group encountered financial risks,such as deterioration of asset-liability ratio,deterioration of cash flow,liquidity constraints and increased exchange rate risk.This paper further analyses the causes of the financial risks.The one-side pursuit of asset scale and ranking of the world’s top 500 has led to the Group’s strategic inclination to carry out large-scale acquisitions quickly.However,the lack of sufficient cash for M＆A and the unreasonable domestic stock market have adversely encouraged the Group to carry out highly leveraged debt financing.The logic of the Group is to make large overseas M＆A through bank loans and private offering of additional shares,rapidly expand the scale of the Group’s assets,take the advantage of the different valuation of domestic and foreign stock markets to raise the price of its domestic listed enterprises.Due to rising price,the subsequent financing will be easier,and the Group profits with the private offering shares.But at the same time,due to the negotiation ability and legal compliance,the Group has no choice but to pay with full cash.And the Group didn’t have enough talents and measures for the financial integration.In view of how to deal with financial risks in overseas M＆A,this paper suggests that the Group should establish a reasonable assessment mechanism,avoid cross-industry overseas M＆A,strengthen the management of the Group’s debt scale to ensure a healthy capital structure,and set up a bet agreement to extend the payment cycle in the payment link.Finally,the Group should strengthen the talent reserve and financial management to deal with the integration.