Analysis Of Financial Risks Of Mergers And Acquisitions Of Internet Companies

With the booming of digital economy,the Internet industry has become extremely rapid in China,and Internet companies have ushered in one period of rapid development after another,and the scale of enterprises is growing,on the basis of which the Internet industry has more emerging industries.In this environment,it is difficult to have a certain market share in the emerging field with strong competition scale,so most companies choose M&A to enhance their market share.However,mergers and acquisitions are not an easy task,as they are not only irreversible,but also have a very complex process.There are various uncertainties in the whole process of M&A,and these uncertainties may lead to some financial risks in the process of M&A,and these financial risks will have an impact on the final result of M&A.Therefore,enterprises need to pay special attention to these uncertainties.This paper analyzes the motivation for Internet companies to choose M&A to expand their markets based on domestic and international research related to financial risk in M&A,as well as the current situation and characteristics of domestic Internet companies’ M&A in China.The financial indicators of Baidu’s M&A of YY Live in the pre-M&A,mid-M&A and post-M&A periods are analyzed to analyze the causes of risks in Baidu’s M&A and to identify the risks.The financial risks of Baidu’s M&A are in four areas:valuation risk in the pre-M&A period,financing risk and payment risk in the mid-M&A period,and integration risk in the post-M&A period.At the same time,this paper evaluates the effectiveness of the measures taken by Baidu to prevent the formation of financial risks during the M&A by analyzing the financial indicators before and after the M&A,as well as analyzing Baidu’s financial data and financial ratios using the entropy weight method and the fuzzy comprehensive evaluation method,and constructing a comprehensive financial risk score judgment standard to evaluate the financial risk level of Baidu by combining the characteristics of the Internet industry.In terms of valuation risk,Baidu considered not only the profit scale of YY Live,but also difficult-to-quantify factors such as market share and monthly end-user numbers when valuing YY Live before the merger,and conducted sufficient industry analysis and due diligence to make the valuation risk of the merger effectively reduced.As for financing risks,this paper analyzes profitability and operating capacity and concludes that the M&A will have a positive impact on Baidu’s operating capacity but a negative impact on its profitability,leading to some integration risks.It is hoped that the research by this paper can help other domestic Internet companies to make risk prevention and control in M&A and reduce the risk of M&A failure.