Research On The Impact Of Performance Commitment On The Impairment Of Goodwill In Mergers And Acquisitions

With the evolution of China’s M&A policies,more and more enterprises are implementing their own development strategies and improving market competitiveness through M&A.Performance commitment is an institutional arrangement for mergers and acquisitions of listed companies in China,which can alleviate the information asymmetry between the two parties to a certain extent,reduce the risk of mergers and acquisitions premium,and protect the interests of small and medium-sized investors.However,in the practical application of performance commitments,unreasonable high performance commitments frequently occur,which increases the evaluation value of the target enterprise,thereby boosting the high premium and high goodwill in mergers and acquisitions,laying a hidden danger of goodwill impairment for subsequent operations.In addition,the failure to meet the performance commitments before the merger and acquisition has led to an increasing number of performance failures,ultimately causing the acquirer to accrue a large amount of goodwill impairment,affecting the sustainable development of the enterprise.Therefore,it is of practical significance to study how to reasonably apply performance commitments to reduce the risk of goodwill impairment.This article first explores the impact path of performance commitment on goodwill impairment from the aspects of setting performance commitment goals and fulfilling performance commitment goals.Secondly,using the case study method,Anjie Technology’s acquisition of Weibo Precision was selected as the object of case analysis.The completion of performance commitments and the provision of goodwill impairment were sorted out,and the reasons for signing performance commitments and existing problems were analyzed.Starting from asset valuation,the relationship between performance commitments and the value evaluation data of the target enterprise was studied through comparative analysis,and the rationality of the valuation results was explored,Then analyze the impact of valuation results on goodwill to explore the process of goodwill and its impairment under performance commitments.Thirdly,it studies the economic consequences of goodwill impairment on enterprises,analyzes financial performance with financial indicators,and analyzes market response with the event study method.Finally,based on the above analysis,propose preventive measures for goodwill impairment under performance commitments.This article draws the following conclusions through research: First,performance commitment is an important basis for predicting future earnings under the income method.If a high performance commitment goal is set,it may promote the enterprise value evaluation results under the income method;Secondly,the final transaction price determined by the merger and reorganization transaction depends on the evaluation results of the evaluation institution on the value of the target enterprise.If the evaluation results are not reasonable,it will generate high premiums and high goodwill,which will increase the risk of goodwill impairment.In addition,if a large amount of goodwill impairment is accrued,it will bring negative effects to the enterprise;Thirdly,regarding the prevention of goodwill impairment under performance commitments,merger and acquisition transaction entities should set reasonable performance targets,and consider adopting performance early warning mechanisms and payment methods of contingent consideration.The evaluation institution should improve the accuracy of the valuation of the target enterprise,as well as the independence and professionalism of the evaluation Regulatory authorities should strengthen supervision over performance commitments and asset evaluation,and increase penalties.