Application And Risk Control Of Valuation Adjustment Mechanism In Merger And Acquisition

Under the integration of the world economy,market competition has intensified.Enterprises have broadened their business channels through mergers and acquisitions,expanded their scale and increased their market share,so as to achieve a reasonable integration of resources in the short term.Mergers and acquisitions have made the company’s products rich and diversified,and the company’s competitiveness in the development will be enhanced,and it will be more able to withstand the blows of risks.There is a big difference in the value evaluation results of the companies that have won the bid.For the long-term interests of the acquirer,the acquired company considers the introduction of a valuation adjustment mechanism from the capital perspective.The valuation adjustment mechanism is like the "reassurance" of both parties to the merger,which can take into account the interests of both.The terms of the valuation adjustment mechanism set the performance indicators that the target company should achieve during the agreed period,which brings expected benefits to the acquirer.It also solves the short-term capital needs of the acquired party by introducing external forces.The evaluation adjustment mechanism is effective for the success of the company.Mergers and acquisitions have played an important role.However,the application of valuation adjustment mechanisms will also expose companies to risks,and corporate mergers and acquisitions may still fail.In recent years,there have been a large number of companies whose valuation adjustment mechanisms have failed and failed to fulfill their promises,which has seriously harmed the interests of the acquirer.It is of great practical significance to study the application and risk control of VAM in corporate mergers and acquisitions.Facing the new normal of the domestic and international economy,Eastern Tower has made further attempts in business diversification and actively implemented mergers and acquisitions projects.At the end of 2015,Eastern Tower and Huiyuanda signed a valuation adjustment mechanism and set Huiyuanda’s performance targets for the next 4 years.East Tower’s merger and acquisition introduced a valuation adjustment mechanism to prevent risks.The failure to apply the valuation adjustment mechanism not only failed to achieve its due effect,but also brought losses to itself.This article selects a typical case of Eastern Tower’s acquisition of Huiyuanda to gain an in-depth understanding of the application of Eastern Tower’s acquisition plan and its valuation adjustment mechanism.Through a combination of qualitative and quantitative methods,the risks of the early,mid-term,and late signing of the valuation adjustment mechanism are analyzed,and the reasons for the related risks in the application of the valuation adjustment mechanism are found.Regarding the many risks that exist,combining theory with actual M&A cases,it is concluded that due diligence should be emphasized in the early stage of the valuation adjustment mechanism signing,the appropriate target company should be selected,the mid-term valuation should be signed,suitable performance targets should be set,and reasonable Terms of valuation adjustment mechanism,etc.,and sign control measures such as accelerating integration in the later stage.It hopes to provide practical and effective suggestions for East Tower in applying the valuation adjustment mechanism for risk control,and to extend this risk prevention and control methods and countermeasures to the market to acquire other companies involved in the valuation adjustment mechanism,so as to promote enterprises in mergers and acquisitions.Better apply the valuation adjustment mechanism and effectively control the risks it brings.