| In recent years,due to the continuous restructuring of industries and the deepening of supply-side reform,many enterprises in traditional industries are facing severe challenges and need to quickly adjust their business strategies and business models to cope with the changes in the capital market.Under such circumstances,many traditional enterprises choose to merge and acquire high-tech companies with strong technological capabilities in order to reduce their business risks and complete their strategic transformation.However,due to information asymmetry and other problems in Mergers and Acquisitions,some companies have excessive M&A premiums and serious accumulation of goodwill in M&A.In order to guard against the potential risk of goodwill impairment due to M&A of companies with high premiums,more and more companies are including performance commitments in their transaction agreements,and performance commitments as a risk management tool are increasingly being used to avoid goodwill impairment.It is therefore necessary to monitor the domestic M&A boom and examine how to set up effective performance commitments to address the potential goodwill impairment risk in high premium light asset M&A.The thesis first analyses the theoretical support for high premium M&A based on theories such as synergy effect,real options and incomplete contracts,and compares and reviews the literature on M&A premiums,goodwill impairment and performance commitments.Secondly,a case study is applied to the M&A of Zhejiang Fortune,which introduces the basic circumstances of its premium M&A of the asset-light company Taiyi Fingers,and analyses the motivation for using performance commitments in this M&A.Then,in the context of Zhejiang Fortune’s high-priced M&A activities,we analyse the mechanism of performance pledges to prevent goodwill impairment in terms of the causes of goodwill impairment arising from high-priced M&A,the enterprise value assessment model,and the mechanism of clause design and effectiveness.Finally,a quantitative analysis of the economic consequences of performance commitments to prevent goodwill impairment is carried out using financial indicators,principal component analysis and event study methods.The study shows that when large amounts of goodwill are generated by a high premium M&A firm,well-designed performance commitments can effectively prevent the impairment of goodwill in the main merging firm.Specifically,performance commitments can reduce the valuation risk arising from an excessive pre-merger premium rate for the underlying assets,as well as prevent the operational risk of the acquiree during the commitment period in an M&A and the possible impairment of goodwill by the acquirer after the M&A;there are some shortcomings in choosing the income approach to value the subject company in an M&A,while a valuation method based on the B-S model can better reflect the actual value of the company;Positive signals regarding performance commitments can stimulate share prices to rise and obtain good market reactions.The implementation of performance commitments has an incentive effect as evidenced by the positive impact of this premium M&A of Zhejiang Fortune on the company’s operating performance.Based on the results of the case study,the thesis gives recommendations.The M&A party should make a reasonable selection of the subject company,adopt a share-based payment method,and the main merger party should continuously strengthen the supervision of the subject company;as for the design of the performance promise terms,the performance promise index should be set reasonably,the design of exercise criteria should be diversified,and the incentive clause should be designed to provide incentives to the management in order to better prevent the impairment of goodwill. |
