Research On The Causes And Effects Of High-Premium Merger And Acquisition Of Zhangqu Technology

Under the background of Internet economy,lots of policies and regulations has been launched by the Chinese government,promoting the development of software information service enterprises.In such a macro environment,with the scale of the smart phone market expanding,the statement of information technology is constantly updating.So the changing industry environment urges the game industry,especially traditional web game companies,to turn to mobile game business development.With the promotion of external policies and the demand for industry transformation,many game companies choose to expand outward through mergers and acquisitions.However,game companies often pay transaction consideration that is higher than the intrinsic value of the acquired company to conduct mergers and acquisitions.What has been ignored is that high-premium mergers and acquisitions bring high risks.This phenomenon has not only aroused the attention of the regulatory authorities,but also triggered a wide discussion in the academic circle.This paper selects the case of continuous high premium merger and acquisition of Zhangqu Technology as the object of research and analysis.This paper starts from the perspective of merger motivation,causes of high premium,risks and effects of merger and acquisition.Besides,it also studies and analyzes whether high premium merger and acquisition can bring positive and beneficial effects to enterprises.This article will use the case study method to carry out research on the series of mergers and acquisitions that took place in Zhangqu Technology.First,the paper expounds not only the concept and theoretical basis of M&A motivation but also the evaluation method of M&A effect.On this basis,it deeply analyzes the motivations behind the continuous acquisitions of Zongwang Pioneer,Playcrab Technology,upstream information and Tianma Time and Space by Zhangqu Technology.Then,starting with the process of equity value evaluation of the four acquired enterprises,comparing with the premium level of successive M&A cases in the same industry,the paper explains the premium degree of this M&A.By the way of combining Zhangqu Technology with the whole process of merger and acquisition,this paper analyze the causes of continuous high premium M&A and the existing risks in the process.Then,from the perspective of capital market and synergies,using event study method,this paper discusses the M&A effect of continuous high premium M&A of Zhangqu Technology.Finally,the conclusion is drawn and corresponding suggestions are put forward in view of the high premium M&A risk.Studies have shown that the motivations of Zhangqu Technology’s continuous M&A include expanding the scale of economies,reducing operating costs,expanding market shares,and increasing shareholder equity.This paper finds that the reasons for the high premium of M&A mainly lie in the limitations of valuation methods,the support of performance commitments,and the motivation of the managers to pursue the maximization of personal interests.The risks in M&A mainly include the following aspects,value assessment risk,financing risk and operating risk.In the part of effect analysis,through the analysis of the event research method,it is found that the capital market’s response to the M&A proposals of Dynamic Internet Pioneer,Play Crab Technology,Upstream Information,and Tianma Time and Space are all positive.Through the analysis of synergies,it is found that continuous mergers and acquisitions have enabled Zhangqu Technology to obtain a certain profit effect during the consecutive mergers and acquisitions.However,within three years after the completion of the merger,it has not made any difference in operating ability,management efficiency,financial efficiency and technology integration efficiency.Finally,through the analysis of economic value-added,it is found that in the process of continuous M&A,the use of investment funds did not meet expectations,and the company’s value did not increase but declined.To sum up,the continuous mergers and acquisitions of Zhangqu Technology have not brought positive effects to it.This article hopes to analyze the motivation and effect of the continuous highpremium mergers and acquisitions of Zhangqu Technology to remind the highpremium mergers and acquisitions of Chinese online game companies and provide suggestions for similar mergers and acquisitions.