Research On Performance Commitment Risk And Prevention Of M&A In Game Industry

In recent years,due to the development of Internet economy,China’s game market has become hotter,and the M&A transactions in the game market have become more frequent.Compared with other industries,M&A in the game industry has significant industry characteristics and high premium characteristics.In order to alleviate the uncertainty of M&A caused by high premiums,performance commitments are used more and more frequently in M&A transactions in the game industry.Performance commitment can not only adjust the deviation of M&A valuation,but also play a role in alleviating information asymmetry and motivating the management of the target company to a certain extent.However,there are also some risks in the application of performance commitment in game enterprise M&A.Therefore,in order to effectively play the positive role of performance commitment in the M&A of game enterprises and protect the stakeholders of game enterprises,it is of great practical significance to study the risk of performance commitment in the M&A of game industry.This paper takes Whole Easy Internet Technology Co.,Ltd.to acquire Beijing Cailiang Technology Co.,Ltd.as an example to study the performance commitment risk and prevention of M&A in the game industry.Firstly,on the basis of sorting out the literature,this paper conducts theoretical analysis based on the synergy effect theory,information asymmetry theory,risk management theory and signal transmission theory.Secondly,this paper collected and sorted out the application of performance commitment in merger and acquisition of 37 game companies,and analyzed the status quo of performance commitment in merger and acquisition of game industry and the status quo of performance commitment risk.Thirdly,in order to further analyze the risk of performance commitment,this paper selects a realistic case of Whole Easy Internet Technology Co.,Ltd.mutual merger and acquisition technology,and studies the risk of performance commitment from three aspects: core risk layer,risk expression layer and risk incentive layer.It is found that the performance commitment signed between Whole Easy Internet Technology Co.,Ltd.and Beijing Cailiang Technology Co.,Ltd.has not reached the expected effect and there are certain risks.At the core risk level,the three clauses of performance commitment target value,compensation agreement and incentive policy are set irrationally.At the level of risk performance,after the signing of performance commitment,there are risks of the target company achieving performance through earnings management,major shareholders’ arbitrage damaging minority shareholders’ rights and interests,goodwill impairment leading to financial risks and reputation damage risks.At the level of risk inducement,Whole Easy Internet Technology Co.,Ltd.has the risk that its managers are overconfident,fail to fully implement due diligence and over-rely on the credit enhancement function of performance commitment.Finally,in view of the main risks existing in the case,this paper puts forward corresponding risk prevention suggestions for Whole Easy Internet Technology Co.,Ltd.This paper puts forward some suggestions on preventing M&A performance commitment risk from three levels of risk.At the core risk level,the target value of performance commitment should be set reasonably,and the compensation method and incentive policy should be improved.At the risk performance level,strengthen the supervision of managers’ behavior and prevent earnings management behavior;Strengthen the management and disclosure of goodwill impairment;Optimize the ownership structure,improve the corporate governance system;Attach importance to the operation of the target company and establish an effective internal control system.At the risk inducement level,do a good job of due diligence,and use the board supervision system to reduce the overconfidence of managers.The above suggestions can provide some reference for preventing performance commitment risk in game industry M&A.