The Research Of VC/PE’S Influence On M&A Performance

We’re seeing an ever increasing number of companies with VC/PE shareholder were acquired by listed companies, making M&A become VC/PE institution’s exit channel only next to IPO. As is known to all, VC/PE have strict request for the return on investment, but the high rate of return is because VC/PE have increased the target company performance, or they just improving M&A valuation so as to obtain high return? Does valuation bubble exist in this kind of M&A? It is good for rational investment by clarifying those problems, especially for preventing industrial investment valuation bubble from transferring to the capital market.In order to make sure whether valuation bubble exists in the listed company acquire unlisted company with VC/PE shareholder or not, that is means whether it will lead to a worse performance after acquired this company. From the target firm perspective, this article’s theoretical part analysis the influence of VC/PE on M&A performance by two ways: influencing the M&A pricing or affecting the target company’s performance. Game theory point out that VC/PE will take high price strategy, push up the M&A pricing, but the key lies to confirm valuation bubble is to clarify whether VC/PE have improved the target company’s performance. VC/PE institution affects the target company’s performance by playing the role of the special capital provider and active shareholder. When VC/PE plays the role of active shareholder, it can be an effective monitor or a growth intruder or even an ineffective supervisor. Because VC/PE will whitewash the target company performance in order to obtain higher return, so, no matter what kind of role it plays, the M&A performance is better in the short term by purchasing such company. If the VC/PE in the target company playing the role of a special capital provider and effective supervisor, it can improve the target company long-term performance and M&A performance for a long time, there is no valuation bubble when purchasing this kind of company; But VC/PE will do harm to the target company long-term performance when it plays the role of ineffective supervisor and growth intruder, so M&A performance is also bad in a long-term, valuation bubble will exist in this kind of M&A. whether valuation bubble exists in M&A or not depending on the role of VC/PE in target company, this requires an empirical analysis. In this paper, using M&A cases of listed company of stock market from2011to2013as a sample, examining the relationship between the VC/PE and M&A performance by using the single evaluation method and comprehensive evaluation method, and test the difference of short-term and long-term M&A performance. Empirical analysis indicates that the VC/PE has a promoting effect on short-term performance, but it do harm to the long-term M&A performance. The Difference between short-term and long-term M&A performance, showing that M&A performance is worse in a long-term by purchasing company with VC/PE shareholder, better performance in short-term just because the VC/PE has whitewashed the target company’s performance. The empirical results also show that the VC/PE in the target company is playing the role of growth intruder and ineffective supervisor rather than effective supervisor or special capital provider, so, there is a valuation bubble exist in the VC/PE M&A.All in all, Because of VC/PE’s profit-seeking nature, it doesn’t promote the target company’s performance, but increases the M&A valuation prices. Therefore, when choosing targets, the listed company should pay attention to the company with VC/PE shareholders.