A Study On The Impairment Of Goodwill On High Premium Mergers And Acquisitions And Its Economic Consequences Of Leo Shares

With the rapid development of China’s economy and capital market,as well as the government’s policy support for mergers and acquisitions,the scale and number of mergers and acquisitions and restructuring have been on a significant increase in recent years.As enterprises achieve rapid expansion through M&A restructuring,the goodwill accumulated is also increasing rapidly,and the proportion of goodwill in the assets of enterprises is rising,thus posing significant goodwill impairment risks to enterprises.As problems such as poor synergies or failure to meet the performance commitments of the underlying companies after high premium mergers and acquisitions by enterprises continue to surface,many A-share listed companies have made huge goodwill impairment provisions in early 2020,resulting in damage to the interests of some investors and also bringing about negative impacts in other areas,and the goodwill impairment mess has received a great deal of attention from the China Securities Regulatory Commission.In this regard,on 24 May 2022,the SASAC issued the Notice on Strengthening the Management of Goodwill of Central Enterprises,indirectly indicating that the government has started to tackle the chaos of irregular goodwill management in the market.Therefore,it is necessary to study the impairment of goodwill faced by listed companies after mergers and acquisitions in order to provide more accurate information on goodwill.Using literature analysis,case study and normative analysis,this paper examines the causes and economic consequences of several large goodwill impairments after high premium mergers and acquisitions by listed companies through a case study of a cross-border merger and acquisition of Leo shares,and makes constructive recommendations to improve the quality of goodwill information in the market.The results of the study found that LEO set excessive performance agreements in its cross-border M&A of digital marketing companies,and the subject company was significantly overvalued but still accepted its M&A premium.In addition,the subsequent measurement of goodwill may have been motivated by surplus management,and major shareholders frequently pledged and reduced their shareholdings prior to the announcement of goodwill impairment information,resulting in huge fluctuations in corporate performance and share prices,which also caused serious damage to the interests of small and medium-sized investors.In order to solve this problem,this paper makes the following recommendations:the M&A process should use appropriate valuation methods and reasonably set up performance agreements;new ideas can be adopted for the subsequent measurement of goodwill,such as combining the impairment test method with the amortisation method;the regulatory authorities should increase the supervision and punishment of goodwill information disclosure;in addition,investors should actively learn scientific investment concepts and participate in corporate governance In addition,investors should actively learn scientific investment concepts and participate in corporate governance to protect their own interests.