Research On M&A Strategies From The Perspective Of Game Theory

With the recovery of the international financial environment and rapid development of Chinese economy in recent years, Chinese M&A(Merger and Acquisition) markets achieve a growth type of"blowout". Setting price and strategies of M&A is a key factor to decide the success of mergers and acquisitions, which made the research on this issue becoming particularly important. M&A business and target companies are the two main game side in mergers and acquisitions. It is the severe asymmetry that leads to the complex interest conflict with each other, and the difficulty of determining the balanced price of the game. Therefore, constructing a reasonable game model of M&A price and making the game of the two sides achieve Nash equilibrium become an urgent problem to solve in M&A, which is also the purpose of this paper.Two parts are included in this paper:(1)Applying the classical game theory to establish static game and dynamic game model basing on the M&A business and target companies with the purpose of solving the existed pricing issues in M&A. Dynamic game imitates the offer-counteroffer process of indefinite complete information, from which alternating offers model are established. And with the help of Harsanyi transformation, alternating offers model under incomplete conditions are also constructed.(2)Using evolutionary game theory to solve the existed pricing issues in M&A and establish offer-counteroffer model under the risk of breakdown and predict the ESS evolutionary stable strategy of replication dynamics through the constant adjustment between the two sides of M&A.The main conclusions of this paper are as follows:(1)By means of the discussion of static game model and dynamic game model in M&A transactions and the analysis of the various factors on the equilibrium price, the author makes the conclusion that the equilibrium price is not only connected with the patient disagrees of the two sides but also the order of offering price and the acquisition premium. The uncertainty caused by incomplete information has a direct influence on the game results and profit of the two sides.(2)Through the research of offer-counteroffer model between M&A business and target companies, which are under the risk of breakdown, the author also find that under the condition of rationality and asymmetry, the two sides of M&A constantly make adjustment and correction during the negotiations to achieve evolutionary stable strategy of dynamic replication, which proves that the evolutionary stable strategy from the analysis of evolutionary game is itself the fully rational Nash equilibrium and at the same time has the stability towards the rational side of game limitations and error interference. Therefore, the analysis of bounded rationality is absolutely not worse than the fully rational game both in theory and application.