Case Study On The Motivation And Performance Of FAW Car’s Merger And Acquisition Of FAW Jiefang

Mergers and acquisitions may help businesses grow quickly and improve their competitiveness.The automobile industry has encountered more problems and harsh competition as a result of the unexpected emergence of COVID-19 and the rising downward strain on the economy.China is the largest country in automobile production and sales in the world.In recent years,China has published a series of reform documents aimed at the automobile industry.The National Development and Reform Commission and the Ministry of Commerce have announced that China’s automobile industry will gradually open its foreign investment shareholding limit and will cancel the foreign shareholding limit for commercial vehicles in 2020 and passenger vehicles in 2022.In the future,there will be more foreign wellknown automobile brands to enter the Chinese market with the identity of sole proprietorship.Against this backdrop,on March 28,2019,FAW Automobile,the listed company of FAW Group,completed the enterprise merger of FAW Jiefang Co.,LTD under the same control through the combination of cash payment,private placement of shares and asset replacement.On March 18,2020,FAW Jiefang became a subsidiary of FAW Cars,and the amount of acquisition ranked first in the automotive industry that year.This case is representative in terms of companies responding to industry policy changes and using related party acquisitions to improve performance.This thesis discusses the motivations for FAW Car’s M&A restructuring in the context of macro policies and industry situations,uses a combination of evaluation methods to comprehensively evaluate and analyse M&A performance,and summarizes the case’s implications for companies and government departments,which will help companies understand the impact of business combinations under common control on corporate performance and help government departments further strengthen regulation of related party M&A.This thesis adopts the research method of combining theoretical analysis and case study.The theoretical part expounds the concept and motivation of M&A,the concept and evaluation method of M&A performance.The case study part firstly explains the policy background and industry background of M&A,the introduction of both parties and post-merge integration.Secondly,combing with the current national policy and industry development situation,the thesis analyzes the motivation of FAW Car M&A FAW Jiefang.Various performance evaluation methods were adopted to evaluate the M&A performance from multiple angles,including the event study method,principal component analysis,EVA and balanced scorecard to comprehensively evaluate the M&A performance of FAW Car acquisition FAW Jiefang in all aspects.The case study revealed that significant changes in the domestic automotive market environment and the resolution of inner-group competition contributed to the M&A,which generated positive financial performance,enhanced the company’s value creation capability and R&D strength,and improved its relative ranking in the automotive industry,as well as a positive market response to the M&A.Finally,the case analysis provides references for future development.For enterprises,successful mergers and acquisitions can help improve corporate performance and better cope with market environment and macro policy changes.For the government departments,actively promoting the merger and reorganization activities between state-owned enterprises is in line with the direction of state-owned enterprise reform,while strengthening the related party merger and reorganization information disclosure system and relevant laws and regulations construction is also needed.