Case Analysis On Performance Commitment Terms Of BR Enterprises’ M&A

Mergers and Acquisitions(M&A)plays an indispensable role in this era of information and globalization.It is often considered as a useful way to help corporations expand the scale,optimize the allocation of resources,improve the value of enterprises,and quickly achieve horizontal or vertical development.M&A is also a capital game,and the high risks inside it should attract our attention.Many high-premium M&A failed to meet the performance commitment,and major shareholders used M&A to put low-quality assets into listed companies and speculated on stock price cashing.They seriously damage the interests of listed companies and their minority investors.In order to promote fair transactions,improve the quality of the underlying assets,adjust the valuation of M&A,and protect the interests of investors,performance commitment agreements are used in M&A.China’s performance commitment agreements originated from the reform of non-tradable shares in 2005 and have become more and more common in M&A.In the process of implementing performance commitments,it appears to have three major phenomenon,overvaluation,over profit forecasting and low achieving rate.It is of great significance to study how to make reasonable use of performance commitment agreements.Maximize the influence of performance commitments in valuation and pricing,terms setting of indicator and compensation.It will promote the M&A transactions and the development of capital market.Based on the case of BR Enterprises’ M&A,this article is going to focus on analyzing and studying how to design the terms of performance commitment.Looking forward to provide some suggestion for a win-win situation in M&A.Firstly,this article will introduce M&A and the performance commitment system.Furthermore,the article will analyze the current situation of the performance commitment and its influence.Then,through the case study,the article will analysis the impact of the performance commitment plan on the valuation of the target company,the rationality of its terms,the performance of commitments,and the impact on listed companies and their minority investors.Finally,the article will draw a conclusion and give some optimization suggestions based on the case study.