Thinking Of M & A Process, Valuation And Tax-related Accounting Issues

With the development of market economy and the increasing cross-border business, the international competition between enterprises is becoming increasingly fierce. Since China's accession to WTO, trade barriers have been phased out. Therefore, in order to take a place in the intense competition, enterprises should carry out strategic restructuring, optimal the allocation of resources and select the way of scale expansion eventually. In addition, the 2008 outbreak of worldwide financial crisis make it both a challenge and an opportunity for Chinese enterprises. Adjust the industrial structure as well as optimize the allocation of resources has already become a hot topic. Mergers and acquisitions (M&A) which is known as one of the most effective expansion tools during the transformation from product management to capital management has become an important way to modify the organization structure and obtain competitive advantages.Based on the situation that M&A will become an increasingly common enterprise behavior currently and in the future, this paper attempted to describe the impact of M&A for enterprises starting from the financial and tax through analyzing the motivation of M&A, the M&A purposes and how to select and evaluate a target company.This paper is divided into three parts. The first part introduced the basic theory of mergers and acquisitions, including the concept and the classification of M&A as well as its present status. This paper focused on the latter two parts. The second part mainly indicated the valuation assessment during M&A process and how to find a suitable target company. Considering the imperfect assessment system in China (for instant, underestimate or inaccurate), valuable suggestions were given to solve the problems during the value assessment for target company. The third part discussed the tax issues involved in M&A, illustrated the impact of current tax system on acquisition accounting, investigated the relationship between tax and accounting treatment, furthermore, gave the explanation with the combination of existing tax system and the accounting treatment.