Research On The Influence Of Performance Commitment On Goodwill Impairment Risk In Premium M&A

Under the guidance and support of government policies related to M&A and restructuring,Chinese enterprises are increasingly choosing to implement M&A strategies to improve their core competitiveness based on market demand and corporate development plans.However,in practice,the high risk of goodwill impairment caused by M&A has become a sword hanging over the heads of enterprises.Many scholars have confirmed that in M&A activities,both parties set their performance targets too high and overestimate the value of the target party,which will result in high goodwill and lay the foundation for subsequent goodwill impairment.In order to solve the various risks caused by information asymmetry in M&A practice,performance pledges were created,which mainly serve to agree in advance on the uncertainties of the future of the acquired party and minimize the impact of the M&A valuation bubble on the development of the enterprise.However,the use of performance commitments has caused serious problems,exposing the "short-sightedness" of the management of the target party,making it impossible for the M&A to play a synergistic role due to its risk-averse role.Therefore,how companies can scientifically and reasonably use performance commitments to prevent the aforementioned goodwill impairment risk,and what measures regulators should take to regulate the order of the M&A market and strengthen the restraint of performance commitments have become issues that need to be urgently studied,and provide an opportunity for this paper to do so.In order to study the specific impact of performance commitments on goodwill impairment in premium M&A events,this paper first collects and organizes the specific situation of performance commitments and goodwill impairment from the capital market,starts with the case of Feile Audio’s M&A of Shenan Group,analyzes how performance commitments have an impact on goodwill impairment risk,and proposes targeted countermeasures to prevent goodwill impairment risk.This paper finds that,firstly,before the performance commitment was signed,there were problems of performance commitment raising the M&A premium,unreasonable performance commitment target setting and unreasonable terms setting,which led to the mismatch between the real profit level of the subject party and the value of goodwill and the existence of large water in goodwill,which is the fundamental reason for goodwill impairment at a later stage;secondly,in the performance commitment fulfillment,the control ownership of the subject party by the M&A party is unknown,resulting in the M&A Due to the existence of the principal-agent problem,the subject party forcibly completes the performance commitment by inflating profits and other acts,which damages the interests of the M&A party and increases the probability of goodwill impairment risk;third,as the number of performance commitments increases,the number of performance non-compliance events increases,and the reasons for this can be seen that the incentive and restraining effect of performance commitment is lost,and the subject party loses the positive operating On the other hand,the goodwill impairment treatment should be ignored,and the one-time impairment will send bad signals to the outside world and greatly affect the performance of enterprises.In this paper,we believe that in order to prevent the impairment risk of M&A goodwill,we should start from three stages before the performance commitment is signed,during the performance and after the end of the commitment period.Specifically,we should examine the performance capability of the target party before the performance commitment is signed,prevent the performance commitment from over-supporting the transaction consideration,and formulate reasonable performance commitments;during the performance commitment performance process,we should strengthen the performance management and supervision of the target party and improve the disclosure of relevant information of the target party;after the end of the performance commitment period,we should continue to strengthen industry integration,improve the subsequent measurement of goodwill,and increase the penalties for defaulters in various aspects The Company will continue to strengthen industry integration after the end of the performance commitment period,improve the subsequent measurement of goodwill and increase the penalties for defaulters.