The Case Analysis Of Zhejiang Daily Media Merges Bianfeng&Haofang With High Premium

With the further advance of the reform of the cultural system, cultural and mediaindustry entered a golden period of development. As an important part of thecultural media industry, the online games industry has also ushered in unprecedentedopportunities to develop. In2013, China’s online games industry set off a waveof mergers and acquisitions that have the same characteristic is the "high mergerpremium". But the high merger premium has raised the market’s question widely. Thearticle choses the case of Zhejiang newspaper media’s high premium acquisition ofBianfeng and Haofang to conduct case study. The author hopes through the caseanalysis to explore the causes of the high acquisition premium, and discuss the issueof company’s valuation and pricing.This paper studies on the high acquistion premium will be carried on from thefollowing four aspects:1, study the merger premium from the perspective of theaccounting recognition of the internally generated goodwill;2, study the mergerpremium from the perspective of the asset valuation;3, study the merger premiumfrom the perspective of the merger synergy;4, study the merger premium from theperspective of the merger premium payment risk management.The online games industry as a light asset management industry, the intangibleresources which are excluded from accounting confirmation and the quantitativesystem constitute the main value of enterprises,thus underestimate the book value andthe overestimate the acquisition premium. In the view of the limitations of financialstatements, before the acquisition we often use the asset evaluation method todetermine the true value of the enterprise. Because the acquisition price uses theassessed valuation value as a reference, from this perspective, assessment ofvalue-added rate determines the acquisition premium rate. The study also found thatin the value assessment of the light asset management firms we always use futureearnings method, and the growth and ROE of the company importantly influence theassessment result. From the perspective of the buyer, the merger was willing to acceptthe high acquisition premium, because the buyer values more about the synergy,including financial synergy, including strategic synergy, operating synergy, than theunderlying asset itself. And the buyer is dare to accept such a high premium lies in its adoption of a series of risk control measures, including Valuation AdjustedMechanism, business integration, management ownership etc.. which will greatlyreduce the acquisition premium payment risks. Through analysis the article concludesthat acquisition Premium comes mainly from three aspects: the internally generatedgoodwill pops up after the asset valuation;the underlying asset has synergy value tothe acquirer;the acquirer holds optimistic attitude towards the cultural industry. Butthe present accounting system and evaluation method exist some problems which areworth discussing:1、internally generated goodwill has not been recognized;2、in theaccounting recognition we can’t regard all the meger price difference as goodwill;3、the equity method only considers the target company’s going concern value notconsiders the synergy value, the evaluation results tends to be overestimated.Therefore, the article suggests:1、strengthen the study on the accounting recognitionof the internally generated goodwill;2、advance the traditional asset evaluationmethods, the underlying asset’s investment value on buyer should be taken intoaccount in asset evaluation;3、using Valuation Adjusted Mechanism to prevent theindustry risk.