Financial Risk In M&A And Its Handling

M&A is a kind of Investment behavior that, one enterprise can get the control of other enterprise(s) through the acquisition of part or the whole property. M&A is an important aspect of the Enterprise Capital Management in the market economy situation, which promoted the speed of the flow and reorganization of assets. It is an important strategy for enterprises to pursue self-growth and enhance the competitive ability. Currently, in the context of global economic integration, it is developing with a large-scale and large- scope in the world. In recent years, as China's economic development, M&A has become frequent phenomenon in our country, and it has brought a greater impact to enterprises. However, both inside and outside the country, not all M&As were successful, and there were only a small number of successful cases, because there are significant capital security problems in the M&As.The reason for this is that the merger is a high-risk business activity, and risk passes through the entire M&A activity. If risk was ineffective prevention and control, it will lead to failure. M&A may face systemic risk, operating risk, risk information, anti-takeover risk, strategic risk, policy risk, etc., but no matter what the risk is, the cost of M&A will make it into financial risk. Then it will affect the safety of capital in corporate mergers and acquisitions, which is important to the success of M&A.The main purpose of this paper is to analyze the capital security problems which pass through the whole corporate mergers and acquisitions with a view to propose feasible resolutions for the issue so that M&A can be more effective to enterprises. Based on the mastering and using of the theory of M&A, this paper carries out a financial analysis of M&A activity and makes a discussion of the financial cost and benefit of M&A and its financing and payment. On the basis of this, we analyze the capital security risk existing in the M&A activity and give classifies and evaluation. Then we analyze the causes of the financial risk in the M&A process, and give the solutions in the various stages to avoid or minimize the losses. In this paper, we give attention to combine theoretical study and practical application, we give some more scientific and easy-used evaluation and mathematical models, and we analyze the possible financial cost and the financial risk. On these bases, we exclude the funds of potential safety problems in order to avoid the loss.The contents of this paper are divided into five chapters. The first chapter defines the meaning of M&A, and summarizes the Western and Chinese theoretical studies on M&A. The second chapter analyzes the cost, benefit, payment way and financing way of M&A. The third chapter expatiates on the concept, types, causes, and several evaluations of financial risk, so that to have a clear and profound understanding of financial risk. Then, in the next two chapters, the paper attempts to raise a reference solution for the issues. That is how to avoid, reduce and control the financial risk in M&A. Thereinto, the fourth chapter introduces some identification and evaluation methods for financial risk in M&A, and the fifth chapter explains how to evade, transfer and control the financial risk in M&A.