Research On Risk Assessment Of Enterprises’ Cross-Border M&A Based On DHGF Comrehensive Interation Algorithm

Since the implementation of the "Going Out" strategy proposed by the central government,many Chinese companies have looked at the world,shifted their targets to foreign markets,carrying out foreign investment activities to enhance international competitiveness,cross-border mergers and acquisitions have always been one of the main ways for Chinese companies to invest overseas.In 2016,the number and value of China’s foreign direct investment mergers and acquisitions reached the peak,with the number of transactions reaching 765 and the transaction value of US$135.33 billion.However,due to the strengthening of supervision and political intervention on mergers and acquisitions in various countries around the world,and the weak awareness of enterprises on the identification and prevention of cross-border mergers and acquisitions risks,there are many cases of failed mergers and acquisitions projects.After 2016,the number and value of my country’s foreign direct investment mergers and acquisitions have declined.In2019,there were only 467 outbound direct investment M&A transactions in China,with a transaction value of 34.28 billion U.S.dollars.Therefore,it is very important to study how companies can identify,evaluate and prevent merger risks before embarking on merger and acquisition projects,which will determine the success of merger projects.From an industry perspective,the power industry has always been at the forefront of corporate cross-border mergers and acquisitions.As a model representative in China’s power industry,the State Grid Corporation of China has important reference value for studying the case of China’s national power grid cross-border mergers and acquisitions.China State Grid’s acquisition of Oman’s State Grid equity project is the first Chinese company’s cross-border M&A after the COVID-19 pandemic.This article will take this project as a research case and use a risk assessment method to measure the risk of China’s State Grid’s cross-border M&A.At present,there are many methods to assess M&A risks in academia,mainly including Z-value model,F-value model,fuzzy comprehensive evaluation method and DHGF comprehensive integrated algorithm,etc.Z-value model and F-value model are methods used to assess corporate financial risks.The DHGF comprehensive integration algorithm is composed of Delphi method,analytic hierarchy process,grey relational analysis method and fuzzy comprehensive evaluation method.The algorithm combines the advantages of these four methods,and on this basis,some improvements have been made to achieve a combination of qualitative and quantitative analysis.Some scholars have used this algorithm in the fields of project evaluation,target company value evaluation,and domestic corporate M&A risk assessment,but no scholar has applied this algorithm to overseas M&A risk assessment.Therefore,this article will use the DHGF comprehensive integration algorithm to evaluate the risk of China State Grid’s acquisition of Oman State Grid,and verify the feasibility and reliability of the algorithm for evaluating overseas merger risks.The research content of this article includes the following six parts:The first part: Introduction.This part mainly includes the background and significance of the topic selection,research ideas and research methods,as well as the innovations and deficiencies of this article.The second part: Literature review at home and abroad.This part will sort out and analyze the domestic and foreign literature from three aspects: cross-border mergers and acquisitions related research,China State Grid cross-border mergers and acquisitions related research and DHGF comprehensive integration algorithm related research,and find a new starting point for research.The third part: The definition and theoretical basis of basic concepts.First of all,the basic concepts involved in this article include cross-border mergers and acquisitions and cross-border mergers and acquisitions risks.These two concepts will be explained;secondly,it explains the theoretical knowledge related to the research of this article,including synergy theory,market power theory,monopoly advantage theory and DHGF integrated algorithm.The fourth part: Introduction to the case of China State Grid’s acquisition of Oman State Grid.This section will briefly introduce the acquisition background of this case,the both parties,the motivation for the acquisition and the acquisition process.The fifth part: Risk assessment and analysis of China State Grid’s acquisition of Oman State Grid.Analyze the cross-border M&A case according to the steps of the DHGF comprehensive integration algorithm,measure the risks of China State Grid’s acquisition of Oman State Grid,and obtain the final assessment results according to the risk assessment standards.At the same time,from the analysis and evaluation results of various risk indicators,we understand the reasons for the risk and the magnitude of the risk,and further verify the feasibility and reliability of the DHGF algorithm to assess the risk of cross-border mergers and acquisitions.The sixth part: Risk prevention measures and suggestions for corporate cross-border mergers and acquisitions.According to the risk measurement indicators,this article puts forward some risk prevention measures and suggestions,hoping to provide reference suggestions for companies to assess risks before embarking on mergers and acquisitions projects,so as to better respond to and defuse risks.Through theoretical and empirical research,this article draws the following main conclusions:(1)On the whole,China State Grid’s acquisition of Oman’s State Grid has a moderate degree of risk,and in the process of mergers and acquisitions,they will not encounter particularly big risk obstacles and difficulties.China State Grid can compare with the experience of many successful mergers and acquisitions.The acquisition project was successfully completed.(2)From the perspective of various indicator factors,experts believe that political risk has the largest weight among the criteria-level elements,followed by legal risk,economic risk,and integration risk.Among the index-level elements,the legal environment risk weight is the highest,while the technology integration risk weight is the lowest.(3)Through empirical analysis and evaluation result analysis,the feasibility and reliability of DHGF comprehensive integration algorithm in cross-border mergers and acquisitions risk assessment can be confirmed.When there are two or more target companies,the merged company can use the DHGF comprehensive integrated algorithm to measure the risk of the target company and make a comparison to determine the final cooperative company.