Research On Exchange Rate Risk Management Of Overseas Merger And Acquisition Of Automobile Enterprises

China’s automobile enterprises are in the environment of more overseas M&A projects and intensified bilateral exchange rate fluctuations,exchange rate risk has gradually become a risk that cannot be ignored when China’s automobile enterprises carry out overseas M&A,and the importance of exchange rate risk management is becoming increasingly prominent.Previously,the research scope of scholars at home and abroad focused on the financial risks in mergers and acquisitions,including exchange rate risks.The research perspective was to use financial derivatives to achieve hedging,and the empirical test of research methods was selected.There was a lack of case studies specifically aimed at the diversification management of exchange rate risks.Therefore,in combination with the research results of past scholars,this thesis refines and supplements the research contents,explores the causes of exchange rate risks,and analyzes the exchange rate risk management methods in each stage on the basis of identifying exchange rate risks.Based on the case of Geely’s acquisition of Volvo Car Company,this thesis establishes a selection analysis framework,qualitatively analyzes the exchange rate risk management methods in each stage of overseas acquisition,and explores the management approaches suitable for Chinese automobile enterprises.Firstly,it identifies the exchange rate risk from the two perspectives of the formation reason and the trigger time of the exchange rate risk.Secondly,three representative indicators,namely the amount of foreign currency settlement,the expectation of exchange rate changes and the time of merger and acquisition,are selected to discuss the selection mechanism of exchange rate risk management.Finally,the advantages and disadvantages and effects of each stage of exchange rate risk management measures are explained.This study found that Geely adopted non-derivative tools to eventually save $300million of acquisition costs.However,Geely’s measures were based on the assumption that the dollar and the euro were expected to continue to depreciate.Once the prediction was wrong,Geely would face a large exposure to exchange rate risk.Based on the case,this thesis concludes that according to the phased characteristics of the occurrence of exchange rate risk in overseas M&A of Chinese automobile enterprises,the management methods can be divided into different stages for implementation.The choice of exchange rate risk management is influenced by currency and time factors.Before M&A,the exchange rate risk management measures tend to avoid risks through the design of non-derivative instruments such as M&A schemes,while after the completion of M&A,the management mode shifts to the use of financial derivatives.Finally,this thesis gives specific management suggestions,so that Chinese automobile enterprises can have a clearer idea of exchange rate risk management when conducting overseas mergers and acquisitions.