The Evaluation Of M&A Risk By Chinese Enterprise

As a way of rapidly enhancing the enterprises’ competitiveness and expanding the market share, M&Ahas being chased after by all the enterprises. In china, enterprise M&A began in the1990s. With therapidly growth of Chinese economic and the economic globalization, the quantity and the amount of moneyof enterprises M&A are growing in our country. Through the merger and acquisition, Chinese enterprisesenlarge their scale and improve the market share. Many of them go out of our country and participate in theinternational market. Not only increased the enterprises’ reputation and competitive, but also make theirmanagement more standard. Everything has two sides and mergers and acquisitions is no exception.Although the activity of M&A can bring many benefits to enterprise, it’s also a kind of complicatedinvestment activity and has high risk. Practice shows that the success rate of enterprise M&A is not high inChina. Due to some enterprises can’t analyze in the economic environment correctly, or don’t recognize therisk of M&A clearly, or lack the knowledge of M&A law and funds, so that they can’t continue the M&Aactivities. Because of the different of management mode and enterprise culture and lacking the effectivecommunication, some enterprises’ operation encounter difficulty and have a loss after they completedM&A. Therefore, in order to choose the suitable M&A projects, enterprise should fully understand the riskof M&A and evaluate the risk scientifically and effectively before making the decision, which can increasethe success rate of M&A and improve the efficiency of funds. Evaluating the M&A risk not only hastheoretical significance, but also has more realistic significance.Based on our country overseas enterprise mergers and acquisitions as the research object, this paperfirstly introduces the basic theory of M&A, risk and enterprise M&A risk. Then it classifies the M&A riskaccording to the different M&A stages. In the preparation period, the M&A enterprise faces the strategicrisk and asymmetric information risk. In the implementation period, the M&A risk of the enterprise facesare: legal risk, political risk, financial risk and technical risk. Financial risk includes three risks, which arepricing risk, payment risk and financing risk. There is the integration period after the implementationperiod. In this period, enterprise faces integration risk, which includes business integration risk, culturalintegration risk, management risk and the human resource integration risk. At the same time of thetheoretical analysis, this chapter also introduces some related case of M&A, which make the content more rich. Then it introduces the basic method and steps of the fuzzy comprehensive evaluation method. Finally,it evaluates the risk of the Zoomlion M&A CIFA’s case using the fuzzy comprehensive evaluation methodand then concludes the result of risk evaluation. In the last, it discusses the prevention measures of theenterprise M&A risk and analyzes the measures that the enterprise should take from nine parts, which arestrategic target, due diligence, familiar with relevant laws, strengthen the communication and exchangewith foreign governments, valuation and financing, increasing research input, respecting the culture,recognizing the value of employees, optimize the management mode. In addition, the Chinese governmentshould take some measures to create a good environment for enterprise M&A, such as improving the M&Alaw, speeding up the reform of capital market and broadening the financing channels.This paper evaluates the enterprise M&A risk quantitatively based on the fuzzy comprehensiveevaluation model and concludes the risk size of the M&A project，which can provide reasonable basic forenterprises when they have to make decision.