Analysis On The Application And Effect Of Performance Commitment In M&A

At present,M & A activities in China’s capital market are becoming more and more active.In order to overcome the problems caused by information asymmetry in M & A activities and reduce the risk of inflated high valuation;meanwhile,fully protect the rights and interests of listed companies and investors,performance commitment has been widely used.However,due to the fact that promises are easy to make while hard to fulfill,the cases of failure performance commitments of the target company are gradually increasing,which has had an adverse impact on the development of listed companies.Therefore,it is very necessary to deeply explore the impact of performance commitment and study how to use performance commitment more effectively in acquisition.This thesis takes the actual use of performance commitment in TIZA acquired YUANJIANG info and YOUKESHU as the main object for analyzing and researching.The author uses information asymmetry theory,incentive theory and signal transmission theory as the theoretical support of the writing.To begin with,it expounds the basic situation,acquisition process,transaction method,characteristics and completion of performance commitment of all parties to the transaction.Then,goes on with thesis by analyzing the impact of financial indicators and secondary market rate of return on performance commitment.Firstly,using the event research method,this thesis statistically analyzes the change trend of abnormal return and cumulative abnormal return before and after the announcement date related to performance commitment,and analyzes the reflection of the secondary financial market caused by the signing of performance commitment,the achievement of performance commitment and the failure of performance commitment.Secondly,analyzes four key capabilities of the listed company which are profitability,solvency,operation capability and development capability.Based on the data collected,this thesis deeply analyzes the impact of performance commitment on the company’s financial performance and the realization of enterprise synergy;meanwhile,analyzes the impact of withdrawing large goodwill impairment on TIZA.Thirdly,this thesis analyzes the causes of the effect of performance commitment from five aspects: the improvement of financial risk,the impact on enterprise growth,the confusion of internal management,the unreasonable setting of performance objectives and the reduction of major shareholders.This thesis draws the following conclusions through analysis: firstly,performance commitment will indeed play a certain role in promoting and bringing positive returns in M &A.Secondly,the application of performance commitment will bring risks including goodwill impairment,cash out of major shareholders,internal management confusion and difficulties in recovery of performance commitment compensation under certain circumstances.Thirdly,the formulation of performance commitment agreement in M & A is very important,which has a great impact on achieving performance commitment and protecting the interests of the acquirer.Finally,based on the analysis conclusions,this thesis puts forward some corresponding suggestions for the application of performance commitment: firstly,strengthen the corresponding risk response of performance commitment,including thoroughly researching the macro market before signing the performance commitment agreement,reducing operational risks,strengthening internal management and reducing the short-sighted behavior of management;Secondly,reasonably evaluate the subject matter of acquisitions and set performance targets;Thirdly,optimizes terms of performance commitment and compensation agreements.