Research On Goodwill Impairment Of Continuous High-premium M&A For Zeus Entertainment

With the rapid development of China’s economy,the upsurge of merger and acquisition(M&A)has also emerged.Many enterprises expand their business territory through M&A and improve their enterprise value and competitive advantage.However,with the continuous M&A,the scale of goodwill accumulation is becoming larger and larger.Over the past few years,a lot of goodwill impairment has been made by enterprises,which has led to the fact that the profitability of enterprises is not optimistic and has caused great losses to external investors.Therefore,this thesis mainly studies and analyzes the reasons behind the accrual of huge goodwill,hoping to help the research of goodwill and deepen investors’ understanding of goodwill.The thesis mainly adopts the method of case study and selects Zeus Entertainment as the object of case study.The company accrued huge goodwill impairment in 2018,becoming the enterprise with the largest amount of goodwill impairment in that year,and it also continued to accrue a large amount of goodwill impairment in the following years,which is quite representative.Taking the goodwill impairment accrued by Zeus Entertainment as the starting point,this thesis probes into the reasons and motivation of its continuous high premium M&A,as well as the situation of high goodwill impairment accrued by many subsidiaries,analyzes the causes and looks for the relevant links according to the situation of goodwill impairment.The research shows that: first,the extreme controller of Zeus Entertainment due to the equity imbalance and the failure of internal control system is the root of the company’s continuous high premium M&A.The extreme controller may have the motivation to release positive signals to the stock market by carrying out high premium M&A,push up the stock price,and then implement equity pledge to transfer capital.Second,the performance commitment originally used to reduce M&A risk has become one of the factors of M&A premium.In addition,the industry characteristics and valuation methods of M&A enterprises are also one of the reasons for the high premium;Third,the current impairment test method has disadvantages,which provides an opportunity for enterprises to withdraw a large amount of goodwill impairment at one time.Finally,according to the results of the case analysis,the thesis puts forward targeted measures and suggestions from the internal and external aspects of the enterprise to prevent the generation of huge goodwill.