A Study On The Measurement Of Goodwill Of Diversified M&A Enterprises

In recent years,the phenomenon of China’s listed companies through cross-industry mergers and acquisitions to achieve diversified business purposes has become more and more common,and M&A transaction activities are frequent,but due to the existence of industry barriers,there is a large difference between the estimate and the reality,followed by a rapid increase in the amount of goodwill acquired,and many enterprises produce a large amount of impairment after accruing goodwill,the initial measurement and recognition amount of goodwill is large,and the information disclosure is not sufficient and timely.At the same time,there is no unified view on the choice of subsequent measurement methods.This will lead to a significant decline in the company’s operating performance,while causing heavy losses to investors.In this regard,what kind of goodwill measurement method should diversified M&A enterprises adopt to avoid the risk of goodwill impairment?Based on this,this paper takes Baihuacun’s acquisition of Warwick Pharma as a research case and relies on the B-S real option model to calculate the amount of goodwill accrued in the diversified M&A process of the case company,and compares it with the actual M&A,so as to find the problems in the initial measurement and subsequent measurement of goodwill:(1)the asset valuation of the acquired enterprise is too high,and the impact of policy risks is not considered;(2)There is a large gap between the consideration for the merger of Baihuacun and the actual estimate of Warwick Pharmaceutical;(3)Failure to implement the compensation agreement in a timely manner,which is delayed;(4)The unreasonable formulation of performance commitments and compensation agreements exacerbates the risk of goodwill impairment;(5)The recoverable amount does not take into account market risks,and does not have an in-depth understanding of the impact of policy changes in the pharmaceutical industry.It is found that:(1)The optimized B-S real option model is introduced on the basis of the traditional cut method,and it is found that the calculation of goodwill measurement of diversified M&A is more reasonable.(2)Enterprises carrying out diversified M&A should conduct an in-depth and comprehensive investigation of the acquired enterprise,such as the operation of the acquired company,industry characteristics,relevant policies,laws and regulations,and the degree of compatibility and integration difficulty with its own business philosophy.(3)M&A enterprises should first strengthen their own internal control,and regularly and irregularly monitor and inspect the company’s financial indicators and operation and management.Second,enterprises should be required to clearly and completely disclose their M&A related information and explanations of major matters,so as to reduce the space for earnings management and reduce the risks caused by the measurement of M&A goodwill.The possible innovation and contribution of this paper lies in the fact that,from the research perspective,the B-S real option model is introduced and verified for the measurement of goodwill in diversified M&A of companies,and the problems arising in the initial measurement and subsequent measurement of goodwill are found out by calculating the estimated amount of goodwill accrued in the M&A process and comparing it with the actual provision,and a solution is proposed.It is found that in recent years,the goodwill of China’s A-share listed companies has increased through diversified mergers and acquisitions,but the problem of goodwill impairment has become increasingly prominent,which is not conducive to the development of China’s high-quality development strategy.Taking Baihuacun as a case,this paper puts forward targeted suggestions to solve the problem of goodwill measurement in the process of M&A in Baihuacun,which has certain reference significance for other enterprises.