Research On Merger And Acquisition Effect Of Zhefu Holdings Based On Valuation Adjustment Mechanism

Due to the rapid economic growth and increasingly fierce market competition in China,many enterprises choose to seek broader business opportunities through mergers and acquisitions in order to achieve faster growth.Merger and acquisition(M&A)not only brings development opportunities to enterprises,but also brings great challenges.As an innovative form of M&A contract,Valuation Adjustment Mechanism(VAM)appears in more and more M&A transactions..To avert information disparity,diminish investment hazard,safeguard the rights and interests of small and medium-sized investors,and invigorate corporate directors,it is beneficial.The VAM,though it can diminish information asymmetry,reduce the risk of mergers and acquisitions,and to a certain degree,enhance the success rate of such transactions,has been employed by some businesses for mergers and acquisitions with high valuations,premiums,and goodwill,yet not always meeting the performance expectations set out by the VAM.The VAM’s effect on the merger and acquisition effect of enterprises,as well as how to make it better serve them,is of great practical importance due to the deadline’s devastating consequences for both the acquirer and the acquiree,as well as its detrimental effect on China’s capital market.Under this background,this paper selects the currently popular environmental protection industry,and analyzes the case study of Zhefu Holdings’ merger and acquisition of Shenlian Environmental Protection Group and Shenneng Environmental Protection to provide reference for environmental protection enterprises that are trying to achieve mergers and acquisitions through the VAM.Based on the principles of information asymmetry,signaling,and synergy,this article analyzes in detail the M&A transactions and performance commitments in the case.Then,based on traditional M&A effect evaluation methods,this article integrates financial indicator analysis method,economic value added method,and event study method,and attempts to comprehensively evaluate the impact of performance commitment on the M&A effect of Zhefu Holdings from three perspectives: market impact,synergy effect,and value impact.Finally,by studying the comprehensive performance of Zhefu Holdings’ M&A and restructuring through the VAM,the advantages and disadvantages of the VAM are analyzed,and optimization countermeasures are proposed.After establishing the evaluation system of M&A effect in a reasonable way,the research conclusion of this paper is drawn: Zhefu Holdings has a good market effect performance in this M&A,the synergy effect is in line with expectations,and the value effect is significantly improved..Zhefu Holdings has achieved remarkable success in the M&A process,a successful example of the VAM’s application in the environmental protection sector.This will be a source of motivation and inspiration for other companies in the same industry that are aiming to restructure through the VAM.