Research On The Setting And Completion Of Performance Commitment In M&A Reorganization

M&A reorganization is a common method used by enterprises to enhance their own strength,achieve scale expansion,and reorganize resources.However,while M&A reorganization brings benefits,it also contains risks.In order to control the risks in the process of M&A reorganization,many companies choose to sign performance commitments on both sides of M&A reorganization.Performance commitment can promote the fairness and rationality of M&A reorganization,and is used more and more widely in M&A reorganization.Since 2008,China has formally required that performance commitments must be signed in qualified related-party M&A in the form of regulations.In 2011,unrelated M&A were added to the category of performance commitments.With the participation of policies,performance commitment has almost become a necessary item in M&A reorganization,escorting M&A reorganization.This thesis selects the two M&A reorganization events of China Zhonghua Geotechnical Engineering Group Co.,Ltd.as the research object.Based on relevant theories,collect and organize the required information and data,study the setting and fulfillment of performance commitments and the factors that affect the completion of performance commitments,and further study its impact on the acquirer.This thesis first studies whether the setting of performance commitments in China Zhonghua Geotechnical Engineering Group Co.,Ltd.’s two M&A reorganization is reasonable from the perspectives of performance commitment indicator setting,target setting,and M&A premium.Then,analyze the completion of performance commitments.First introduce the performance of performance commitments in the two M&A reorganization,and then analyze the factors that may affect the completion of performance commitments.This thesis proposes five possible factors,which are the external environment,industry conditions,competitiveness of the acquired party,earnings management behavior of the acquired party,and the acquirer’s urging behavior.Finally,using the financial index analysis method and event study method,combined with the actual situation of the acquirer China Zhonghua Geotechnical Engineering Group Co.,Ltd.,to analyze the impact on it when the performance commitment is fulfilled or not fulfilled.This thesis finds that the unreasonable setting of performance commitments will bring risks to the completion of performance commitments.At the same time,the external environment,industry conditions,company competitiveness,earnings management behavior and the behavior of the acquirer will all affect the business of the acquired party,thereby affecting the completion of performance commitments.Once the performance commitments cannot be fulfilled,it will cause impairment of goodwill to the acquirer in the future,affecting the future development of the acquirer,and small and medium shareholders also need to pay for the consequences.The successful completion of the performance commitments will bring benefits to the acquirer and improve business performance and innovation capabilities,but at the same time,the earnings management behavior of the acquired party cannot be ignored.This thesis takes performance commitments in M&A reorganization as the main research content,hoping that the research results can provide reference for companies that are currently signing performance commitments or considering signing performance commitments in M&A reorganization.Remind both parties of M&A to pay attention to high premiums when signing performance commitments,and do not blindly sign performance commitments.The selection of performance commitment indicators and the setting of targets should be determined after comprehensive consideration of various possible influencing factors.In the process of setting performance commitments,the acquired party should actively cooperate and provide authentic and credible information.In the process of fulfilling the performance commitments,the acquirer needs to pay attention to the changes of relevant factors,participate in the management appropriately,urge the acquired party to carry out risk management and control,and also regularly check the value and operation status of the target assets of the acquired company in order to identify risks.The acquired party needs to pay more attention to the changes of relevant factors affecting its own operation,adjust its business strategy in a timely manner,enhance its risk response ability,and promote the smooth completion of performance commitments.And the research results of this thesis also put forward suggestions for the relevant regulatory agencies in our country.In the M&A reorganization market,the regulatory agency maintains the market order.Whether its supervision is effective or not is related to the operating efficiency of the market.No matter when the performance commitment is set or in the process of fulfilling the performance commitments,the regulatory agency must actively participate,strengthen the supervision of both parties of M&A,and create an open,transparent and fair market environment.