A Research On The Wealth Transfer Problems Arising From High-premium M&A And Performance Betting

M&A is an investment activity,through which enterprises can quickly expand their scale,integrate high-quality resources,achieve operational synergies,and expand business segments.Any high-speed development will have certain problems in the process,and the development of the M&A market is no exception.With the rapid development of China’s economy,M&A in the capital market have become more and more frequent and active,and various problems have also emerged.Therefore,the mechanism of VAM agreements has been introduced into M&A transactions.The original intention of the VAM agreement is to alleviate the degree of information asymmetry between the two parties to the transaction in the M&A process,improve the accuracy of the valuation of M&A assets,and reduce the risk of M&A.However,from the current application of VAM agreements in the M&A market,VAM agreements have not really played a role,but have become a tool for some major shareholders of listed companies to take advantage of the opportunity to speculate on stock prices and reduce their holdings at a high level,resulting in damage to the value of listed companies.This paper systematically sorts out the existing research on M&A premiums and VAM agreements by using the literature research method,and based on this,selects Company H as representative cases which used VAM agreements in M&A transactions.This paper analyzed the problem of major shareholders of listed companies using VAM in mergers and acquisitions to transfer wealth,from three levels of the conditions under which VAM mergers and acquisitions can occur,the way of realizing wealth transfer and the impact of wealth transfer.First of all,after analyzing the motivation of VAM and its mechanism affecting the M&A premium in light of the actual situation of the H Company’s case,it is found that one-way VAM agreements and VAM agreements that require cash payment tend to push up the premium of M&A.Secondly,this paper used the company’s financial data and market transaction data to analyze the terms of the VAM agreement in the M&A event of Company H,the valuation and pricing,the behavior of major shareholders and the operation of H company during the VAM period of up to five years.It is found that the valuation pricing and the terms of the VAM agreement of the M&A transaction were unreasonable,which resulted in a series of self-interested behaviors between the two parties to the agreement,harming the interests of the listed company and investors.Finally,this paper summarized and sorted out the transfer path of wealth between all parties in the process of VAM mergers and acquisitions,and concluded that high performance VAM promotes high premium valuation,pushes up the market value of listed companies,and generates a goodwill bubble,while the failure of VAM triggers the arbitrage behavior of major shareholders to choose opportunities,and the shrinking market value leads to damage to the wealth of small and medium-sized shareholders.In order to further confirm the scientific nature of the above conclusions,this paper used the financial indicator analysis and event research method to quantitatively analyze the impact of this VAM M&A event on Company H,minority shareholders and secondary market investors.The results showed that the major shareholders have obtained huge profits through subsequent equity pledges and reductions,while the market value of Company H had been seriously damaged,and the wealth of small and medium-sized shareholders had also flowed out due to the shrinkage of the company’s market price,and the losses are extremely heavy.Based on the conclusions reached,this paper proposed reasonable countermeasures for regulators,listed companies and market investors respectively,with a view to protecting the interests of all parties.