Research On The Financial Risks Of Yili's Acquisition Of Ausnutri

The dairy industry has grown rapidly in recent years as consumption has escalated.With a number of government policies to promote dairy enterprises to become bigger and stronger,there has been a wave of mergers and acquisitions among dairy enterprises.Yili,as a leading company in the dairy industry,has embarked on an M&A campaign for Ausnutria in order to achieve its strategic objectives,capture market segments and achieve synergies.However,M&A is a high-risk investment,especially as there are financial risks in all aspects of M&A that affect the financial security of both parties.Therefore,it is important to analyse the financial risks that arise throughout the M&A process in advance and take countermeasures to minimise the financial risks.This paper uses the Yili M&A of Ausnutria as a case study,and uses literature research,case study,statement analysis and event research methods to sort out the motivation,process and results of the Yili M&A,analyse the financial risks and control measures that emerged,and draw relevant insights to reduce the financial risks of the M&A in the dairy industry.According to the sequence of the M&A process,the main financial risks faced by Yili are:valuation risk due to information asymmetry before the M&A;debt servicing risk due to reliance on debt financing and cash flow risk due to cash payments during the M&A;and poor synergies due to poor integration after the M&A.Based on the above financial risks,Yili’s risk prevention measures are reviewed,the changes in financial indicators before and after the M&A are compared and the effectiveness of Yili’s control of financial risks in the M&A is evaluated using the Zchina Score model,and its effective measures and weaknesses are summarised.Yili’s control measures include: hiring professional institutions and communicating with major shareholders in advance to sign anti-dilution agreements;a combination of financing methods such as ultra-short-term financing notes and equity financing;and using a light integration strategy to avoid some of the risks in valuation,financing,payments and integration.Erie has generally kept its risks within reasonable limits,but needs to be mindful of both long-term and short-term debt service risks.Finally,insights were gained from the control measures combined with the whole case to provide references and lessons on how to effectively control financial risks in M&A of dairy companies: to focus on off-balance sheet resources and use legal means to safeguard the authenticity of information;to reasonably choose financing combination methods and mixed payment methods according to the actual situation of the company,to strengthen internal control and establish a cash flow early warning system;to develop integration plans and strengthen financial supervision,etc.