Research On The Motivation And Economic Consequences Of Overseas High Premium Mergers And Acquisitions Of GEM Enterprises

In today’s severe global competitive environment,mergers and acquisitions as an effective form of economic participation in enterprise development are favored by many managers.Facts also show that many companies grow into corporate giants,often using mergers and acquisitions to achieve the goal of scale.The upsurge of overseas mergers and acquisitions of listed companies in China is constantly rising.At the same time,GEM companies have also joined the ranks of overseas mergers and acquisitions.According to the data statistics of the Cathay Pacific database,the number of high-premium mergers and acquisitions by GEM companies is high,accounting for an average of 67 %.At the same time,the premium rate of overseas premium mergers and acquisitions by GEM companies continued to grow from 2014 to 2021,and peaked in 2021,at 500.31 %.With the continuous expansion of the scale of mergers and acquisitions and the acceleration of China ’s mergers and acquisitions,the phenomenon of high corporate valuation and transaction terminal prices in overseas mergers and acquisitions is becoming more and more common in the GEM.High premium mergers and acquisitions are accompanied by high expectations and high returns,resulting in premium bubbles and increased operational risks.In 2016,against the backdrop of intensifying competition,declining gross margins,rising labor costs,and gradually declining overall industry profitability in the domestic communication infrastructure industry,Digital Knowledge Technology,in order to adopt an outbound strategy,acquired BBHI Corporation at a high premium,expecting to achieve strategic transformation and enhance corporate profitability.This paper uses information asymmetry,diversification,synergy effect and signaling theory as the research bases;case study,event study and financial index analysis as the research methods to analyze the motivation and economic consequences of the overseas high premium M&A of Digital Knowledge Technology Corporation.This paper concludes that there are internal and external reasons for the high premium overseas M&A of BBHI.Internal reasons: First,to promote the strategic transformation of the company through outward development;second,to pursue business and financial synergy;third,to increase the market value of the company to attract more investors.External reasons: Secondly,the country has issued relevant policies to encourage;thirdly,the Internet industry has a development dividend;thirdly,BBHI fits the strategic needs of Digital Knowledge Technology.Through research,this paper finds that : in the short term,the short-term capital response,short-term financial performance and non-financial performance of digital technology respond well,bringing profits and technology to enterprises in the short term.But long-term analysis,the merger makes the stock price and profit of digital technology is far below its pre-merger level,long-term capital market reaction and poor financial performance,facing the risk of delisting.Combined with EVA analysis,the EVA value of Digital Technology decreased after the end of the performance commitment period and was lower than the pre-merger level.At the same time,the company ’s stock price and profit income decline,from the side can be seen on the company ’s small and medium investors also brought losses,and digital technology in 2020 high goodwill impairment,damage to digital technology industry reputation.Based on this analysis of the risks brought about by mergers and acquisitions,including BBHI valuation of high risk,stock market risk and financial risk,and log know technology and gem enterprises put forward corresponding policy recommendations,hoping to provide a case for the benign merger and acquisition of gem enterprises.