Research On The Tunneling Behavior In The High Premium Mergers And Acquisitions

Mergers,acquisitions and restructuring is an eternal theme in the capital market,and the main expansion method used by listed companies has the advantages of fast expansion,short preparation time and low expansion costs,thus conforming to the strategic direction of business expansion of listed companies.In recent years,the number and amount of mergers,acquisitions and restructuring of listed companies have declined,but the level of transaction activities remains high.Facing the blowout growth of the M&A market,we have to think about the possible risks.High premium is a major feature of the current M&A market,behind which is the high valuation of the underlying assets,which needs the corresponding performance commitment as support.If the target enterprise fails to complete the performance commitment within the commitment period,instead of increasing the shareholders’ income,there will be goodwill impairment,underlying losses and other risks,dragging down the listed company.The problems and risks caused by high premium mergers and acquisitions have attracted high attention from the regulatory authorities and the securities market.Therefore,how to prevent and avoid the problems caused by unreasonable premium mergers and acquisitions is a practical problem that needs to be considered at present.This paper reviews the research conclusions on merger,reorganization and benefit transmission,builds a theoretical framework,and studies and analyzes the tunneling problems in the high-premium merger and acquisition of Firm A by case analysis method according to the existing problems in the high-premium merger and acquisition in the existing market.The main theories include market timing theory,merger arbitrage theory,information asymmetry theory and tunnel effect theory.Firstly,it introduces the background of Firm A merger and acquisition of Chongqing Zhong bang,and then analyzes the rationality of the merger premium,which leads to the transportation mode and behavioral causes of the high premium merger benefits,and analyzes the market effect and financial effect of the transportation of benefits after the high premium merger.Finally,the study draws conclusions and proposes relevant countermeasures and recommendations.This paper finds that there is suspected benefit transfer under this high premium merger and acquisition by Firm A.Under the high performance promise and high premium merger and acquisition,there is a huge amount of benefit transfer.The transaction price of this M&A is very high,the subject premium is as high as 575.57%,Enterprise A has the suspicion that the subject assets are inflated and the M&A premium is unreasonable.The transaction is an affiliated transaction,after the equity penetration,Red Sun Pharmaceutical Group is a wholly-owned subsidiary of Firm A’s controlling shareholder,Nan Yi Nong Group,and Chongqing Zhongbang is a wholly-owned subsidiary of Red Sun Pharmaceutical Group,in terms of the affiliation between the two parties,the listed company Red Sun intends to acquire for nearly 1.2 billion yuan in cash is its controlling shareholder’s grandchildren.It can be seen that high-priced mergers and acquisitions do not necessarily mean the purchase of high-quality assets,but can also become a tool for major shareholders to implement the appropriation of interests.In China’s current capital market,the phenomenon of premium M&A is widespread and is mostly the result of major shareholders using the capital market to control and manipulate companies,which is not conducive to the healthy development of China’s capital market.Although early performance is very strong after a high premium M&A,quality problems will gradually emerge at a later stage.This paper argues that in the current economic situation,companies should carefully choose premium approaches to increase corporate value and realize their development strategies.For capital market premium M&A,a more robust information disclosure system should be established to create a better investment environment for small and medium-sized investorsThrough careful study and analysis,this paper not only reveals the study on the interest conveying behavior in the high-premium M&A of case Firm A,but also puts forward targeted policy suggestions and warns investors when making investment choices in the future,so as to avoid companies covering up the interest conveying behavior through high-premium M&A,hoping to provide reference and help for listed companies,investors and regulators to some extent.