Study On Termination Of Performance Commitment Agreement In Enterprise Merger

Worldwide,the capital market is expanding rapidly,but also developing constantly.In this case,enterprises through mergers and acquisitions to optimize the allocation of resources,centralized resources,expand market share,has become the first choice of many companies.This method has gradually become a shortcut for the development of enterprises,which is conducive to the company’s capital accumulation and rapid improvement of market competitiveness.Merger and acquisition is the inevitable result of economic and capital development in the new era.It not only brings huge benefits to enterprises,but also has potential risks.In order to reduce this kind of negative effect,the financial circle has tried many kinds of means,and in these means,the most widely used and the most feasible operation is the performance commitment agreement signed by both sides.Therefore,at the time of merger and acquisition,both parties will sign a performance commitment agreement,and once the target company’s performance falls short of the requirements,the corresponding compensation liability will be triggered.When a performance commitment agreement is reached,it usually plays a role in promoting the success of the transaction,but sometimes it does not matter whether the expected operating performance can be achieved after the merger.Although m&a can make the performance of enterprises grow continuously,but its own subjective factors are a "time bomb".Therefore,in June 2016,China Securities Regulatory Commission stressed that the relevant content of the performance commitment agreement cannot be arbitrarily changed.If the actual performance of the company is not up to the standard,compensation will be made in strict accordance with the signed performance compensation standard.This paper chooses Beijing Yoji as the case study object,which has an important reference for the development of China’s listed companies.First of all,after the acquisition,Shuangjian Group chose to sell the target company at a high price,resulting in the termination of its performance commitment agreement.The reasons and influence behind this are worthy of in-depth discussion.Secondly,under the background of The Times at that time,it was rare for Chinese listed companies to sell back the target enterprise after acquiring it.Therefore,such situation is likely to occur in the future when the performance commitment of the target enterprise fails to reach the expected target.In the case of Shuangjian Group’s acquisition of Beijing Yoji Company,this paper firstly introduces the basic information of the two companies and the whole process of merger and acquisition in detail,and analyzes their motives and objectives.Secondly,it makes an in-depth discussion on the reasons,termination process and possible consequences of the unfulfilled performance commitment.Starting from the mechanism of shuangjian company,this paper summarizes two reasons:one is the internal reason of the company,the other is the external reason of the company.Internal reasons include the decline of the company’s profit level,goodwill impairment risk avoidance,earnings management,etc.External reasons include policy changes and macro environment changes.Meanwhile,Shuangjian’s move,while boosting the company’s earnings and other financial metrics in the short term,was negative from a market perspective,leading to a decline in its stock price.Finally,this paper summarizes the existing problems in the case,and puts forward some suggestions for the future development,in order to provide reference for China’s listed companies to conclude performance commitment agreements,so as to further improve and develop China’s capital market.