Research On The Causes And Economic Consequences Of Performance Default In M&A

With the increasingly severe economic situation at home and abroad and the improvement of capital market,more and more enterprises hope to optimize asset structure,expand market share,achieve scale effect and improve profitability through M & A and restructuring.However,for M & A parties,the risk of M & A is relatively large.More enterprises use performance commitment agreement to avoid M & a risk,and performance commitment is frequently used.However,the disadvantages of performance commitment agreement in the application process began to highlight,the failure rate of performance commitment increased year by year,and the litigation disputes caused by the failure of performance compensation increased gradually.In view of the frequent occurrence of performance default in the M & a market,this paper takes Eco-beauty and Bada Yuanlin as the research object,and makes an in-depth study on the causes and economic consequences of performance default in the M & A,in order to get enlightenment from it,and then to some extent,it can promote the healthy and sustainable development of the M & a market.On the surface,Bada Yuanlin’s performance is affected by the change of macro-economic environment and the difficulty of capital turnover,but in fact,there are deeper reasons.On the one hand,the valuation of the target company pushes up the performance commitment and the high performance commitment pushes up the valuation of the target company,which ultimately leads to the performance commitment goal seriously divorced from the reality and difficult to achieve;on the other hand,the unreasonable setting of the performance commitment clause causes the poor incentive effect,which leads to the short-sighted behavior of the target company’s management;on the other hand,the existence of the performance commitment clause makes the M & A integration not in place.The loss of performance makes Eco-beauty’s market react negatively,financial performance seriously damaged and has a profound impact on subsequent M & A.Through the study of the causes and economic consequences of the case performance default,this paper obtains the following enlightenment:(1)Make a scientific M & A plan,specifically to correctly evaluate its own development,evaluate the investment opportunities to enter the market,carefully select the target enterprises,and adopt sequential M & A.(2)In order to evaluate the value of an enterprise reasonably,we should make full due diligence,use the income method scientifically and control the high premium.(3)To optimize the performance commitment terms,we should set reasonable performance objectives,adopt dynamic adjustment mechanism of performance commitment,link equity payment consideration with performance commitment,preferentially choose share based compensation method,and increase the number of performance commitment compensation parties.(4)Strengthen the follow-up integration of M & A.Specifically,we should establish a regular inspection and supervision mechanism to provide value-added services for the target enterprises.