Research On The Risk Assessment Of Will Co.,ltd Based On Performance Commitment

With the rising activity of M&A and restructuring activities in the capital market,more and more enterprises expect to achieve optimal resource allocation and external expansion through M&A,thus enhancing economic efficiency.By acquiring the technology,business,resources and customers of the acquired party,the M&A parties hope to achieve synergy effects and promote high-speed corporate development.However,the M&A process is not always smooth and risks emerge as the M&A progresses,and the existence of information asymmetry makes it impossible for M&A parties to predict whether the expected results will be achieved.Therefore,in order to protect the rights and interests of investors,performance pledges were created.The original purpose of performance pledges is to prevent the phenomenon of "high valuation" in the M&A process to reduce the risk of M&A,but in practice,it gradually deviates from the original purpose and increases the risk,how to identify the risks brought by performance pledges in M&A and take relevant countermeasures has a significant impact on the effect of M&A.This paper takes performance commitment as the base point,firstly,we explain the research background and significance of the selected topic to show the importance of the research,and then we analyze and evaluate the relevant literature on M&A risk,performance commitment and M&A risk evaluation based on information asymmetry theory,principalagent theory,transmission theory and synergy effect,taking the case of Weir’s M&A of Beijing Howell as the research object.Firstly,an overview of the M&A including the profiles of the two parties,the motivation of the performance commitment and the M&A process is introduced;secondly,the risks faced by the M&A activities of Weir under the performance commitment are identified using the balanced scorecard,and the corresponding risks are identified from the financial dimension,customer dimension,internal process dimension and learning and growth dimension;then,the evaluation indicators are selected according to the identified risks using the entropy TOPSIS model to determine the relevant Finally,we propose measures to address the M&A risks arising from performance commitments,and provide lessons for other companies’ M&A activities.This paper classifies the risks of M&A under performance commitment into policy risk,strategy risk,valuation risk,pricing risk,financing risk,goodwill impairment risk,integration risk and development risk through pre and post M&A stages.The risk evaluation results show that Weir faces the greatest risk in 2018 and the least risk in 2020,mainly due to the financial pressure brought by the M&A.This study provides a deeper understanding of the risks arising from performance commitments at various stages of M&A,and provides implications for the prudent and reasonable use of performance commitments by Chinese companies in future M&A activities.