Research On The Financial Risk Evaluation And Control Of Enterprises' Merger & Acquisition

At the end of 90th of 20th century, there happened the fifth wave of M&A which led by the multinational corporations along with the rapid development of the IT revolution and economic globalization. This wave either from the scale or the number was unprecedented , which revolutionary changed the global industrial structure and the organizational structure of the enterprises. However, the practice showed that, behind the fanaticism of the M & A, there was a cool scene: most of the M&A led to fail. If we go deep into the core of the failure of M&A, we can easily find that the financial risks during the acquisition process are the main reason for failure of M & A. Therefore, how to evaluate the financial risks during the M&A process and how to control them becomes a very practical topic. At present, although there are many researches about the issues at home and abroad, but has not yet formed a satisfactory theoretical system. Few of them have already applied to the practice of M&A. On the basis of previous studies, in this paper, some important and decentralized financial risk theories are put into a unified theoretical framework. According to this paper, you can see what lead to the financial risks of the M&A. This paper also tells us how to evaluate the financial risks of M&A and puts forward the corresponding risk control strategies. I hope that this can play a very good role in guiding the practice of M&A.There are four chapters in this paper as follows:Chapter one: IntroductionFirst, it introduced the purpose and the practical significance of this study. Then it introduced the relevant research literature at home and abroad and made a summary of the present research. The basic ideas and logical structure were then introduced. In the final of this chapter, it introduced the main research methodology which included the positive economics, the normative economics, theoretical derivations, case studies, qualitative analysis and quantitative analysis.Chapter two: The definition and sources of financial risk of M&AThis chapter interpreted several basic concepts in this paper. First, it analyzed M&A by comparing merger and acquisition, considering that M&A was the property transaction activity, which was conducted for the purpose of obtaining the right of target firm. Then it pointed out that the financial risk in M&A was the probability of financial crisis, which was influenced by various factors in M&A. At last, three basic financial risks in M&A were introduced.Chapter Three: The assessment of financial risk of M & AFirst it introduced the principles which the financial risk evaluation system of M&A based on. It included systemic principles, principles of integrity, simple principle and the dynamic principle. Then it established the Finance Risk Evaluation System of M&A combined with the modern enterprise financial theories. This evaluation system was divided into three levels. The first level included three indicators and the second level included nine indicators although the third level included 25 indicators. Later on, it introduced how to use AHP determine weight value, how to set up a fuzzy comprehensive evaluation model. At last, it introduced a case to verify the applicability of the model.Chapter four: How to control the financial risk of M&AIn accordance with each basic financial risk, this part advanced some financial countermeasures as follows.This chapter considered that the controlling of pricing of M&A risks focused on two areas: First, control the uncertainty in the process of the target enterprises assessment. Second, use the Game Theory as the guideline in the process of price negotiations to control the information asymmetric.In view of how to control the financial risk in the process of collecting money, this paper expressed its views on four aspects:First, improve the credibility of enterprises.Second, transfer the true information of the value of enterprise to the market using the appropriate signal select method. Third, design the right capital structure which can make the largest value of the company.Fourth, design the right payment structure in light of the enterprise'own capital situation.In view of integration risk control, this paper proposed four measures: First, integrate its financial and management strategy to enhance the value of restructuring enterprise.Second, promote the optimal distribution of resources to achieve the integration of the assets and liabilities.Third, integrate and innovate its organizations and mechanisms. Fourth, do a good job on financial monitoring before and after the integration work.The innovations of this paper are as follows:1.It pointed out that the financial risks of M&A included the pricing risk in the process of targeting enterprise, risk of arising money and risk of integration.2.It established a new finance risk evaluation system of M&A combined with the modern enterprise financial theories. On the basis of this system, it counted the target weights. Then it constructed a fuzzy comprehensive evaluation system measure the financial risk of M&A.3.It introduced a detailed case happened during the corporate M&A practice to verify the applicability of the fuzzy comprehensive evaluation model.