Diversified M & A Or Correlative M & A?

As an important means of enterprise capital expansion——Mergers and Acquisitions(M&A)have been a hot topic of concern to scholars,and it is the main theme of the capital market. As our Chinese capital market increasingly open, more and more companies in china choose M & A as the main form of business expansion. What factors affect the companies'option to choose diversified M&A or correlative M&A. what is the difference in firm characteristics before Mergers and Acquisitions between the enterprise who choose diversified M&A and correlativeM&A? Domestic and foreign scholars mainly consider the impact on business performance from the perspective of corporate performance after M & A few scholars research the pre-merger firm characteristics. This article study M & A from the perspective of the pre-merger firm characteristics whether affect the enterprise to choose the type of M&A. It has an important Significance to guide enterprises to choose different types of Mergers and Acquisitions.First, according to the research methods of enterprises'performance, this paper elaborate the research literature which is about diversified M&A and correlative M&A. These research literatures were made by domestic and foreign scholars. And this paper evaluates the research status of domestic and foreign scholars. Then we analysis the motivation that why the companies choose M & A. This article mainly focuses on the five motivations: Efficiency Theory, Principal-agent theory, Market power theory, Free cash flow hypothesis, Arrogant hypothesis and Overconfidence theory.In the empirical, In order to study whether there are differences in the pre-merger enterprise performance, enterprise resources, business development potential, the nature of the controlling shareholder of companies and industry factors between the enterprise who choose diversified M&A and correlative M&A, this paper selects 116 correlative M&A events and 157 diversified M&A events which occurred in China's capital market from the years 2004-2008. In other words, the pre-merger characteristics whether affect the choice of type of M&A. From the descriptive statistics and the Logit model regression analysis, we can draw the following conclusions: (1) Enterprises with good performance tend to choose correlative M&A, and enterprises with bad performance tend to choose diversified M&A;(2) Enterprises with strong financial resources are more likely to select diversified M&A, and enterprises with weak financial resources are more likely to select correlative M&A;(3) Enterprises with good potential for development will choose correlative M&A, and enterprises with bad potential for development will choose diversified M&A;(4) Enterprises which are in good industry conditions tend to choose correlative M&A, and enterprises which are in bad industry conditions tend to choose diversified M&A;(5) The firm size can affect the choice of M&A, and larger companies may be more implemented diversified M&A; (6) When study correlative M&A and diversified M&A can whether improve corporate performance, we must consider that the pre-merger corporate performance and business growth potential may affect the corporate performance .At last, based on the research results and the special situation of China's capital market, we state same suggestions to our China enterprises. The end of the article also mentioned the lack of research.