An Empirical Study On The Effect Of Mergers And Acquisitions On Agribusiness

Agriculture industry is a support for the national economy. For a long time, its production and development has been strongly promoted by the central government. Agricultural listed companies are the representatives of advanced productivity, Chinese agri-business plays a very important role for the development of agricultural economic. Under the condition of market economy, mergers and acquisitions, as a kind of allocation of resources, is a shortcut for agricultural listed companies to continue to grow stronger. In essence, mergers and acquisitions achieve the goal of promote business growth through the enterprise property rights, the transfer of control and back together. But M&A is like a double-edged sword, enterprises may achieve economies of scale, or expand market share through mergers and acquisitions, may also be in the financial crisis, or get the loss of competitiveness due to mergers and acquisitions. Our government has issued a series of policies to encourage agricultural listed companies to become bigger and stronger by M&A. Under this background, how to implement firms growth through mergers and acquisitions become a common concern. So the study on how M&A affsect agricultural enterprise growth has a very important practical significance. Based on a sample of the135M&As occurred in Chinese listed agri-business from2006to2010, investigating the influence of the type of M&A, relative scale of M&A, M&A premium, the same territory and connected transaction on agri-business growth, arid give an explanation from the motive of the M&A motives, at the same time studying the role of the government subsidies in the relationship between scale of M&A and firm growth, and the relationship between M&A premium and the agri-business growthThe study found:M&A has a significant effect on the growth of agricultural enterprises.From the M&A type, the growth of agri-business through mixed M&A is better than horizontal M&A and vertical M&A; From the scale of M&A, mergers and acquisitions, the bigger the targeted-firm scale, the better the firm growth, and the government subsidies has a significant positive regulatory role on the relationship between the firm growth and size of M&A; From the M&A premium, there exists a significant negative correlation relationship between M&A premium and agri-business growth, namely high premium did not bring high-growth, and the government subsidies has a significant positive regulatory role on the relationship between the firm growth and M&A premium; Connected transaction a significant negative effect on agri-business growth; The same territorial M&A is not the major factor to affect the corporate growth.Empirical results reflect the diversity M&A e is better than the specialization of M&A, but most of the agri-business M&A lack of synergies, pursuit the private benefits of control is still the main motive. Government subsidy greatly affected the agri-business performance, government subsidies as a form of free transfer into agricultural enterprise, from the perspective of the financial statements, if used correctly, in the short term, which can greatly improve the agri-business operating performance; But without the right guide and the corresponding mechanism, its short-term management benefit of firm growth is just an illusion, disguise the short-term difficulties, but in the long development, it’s easy for agri-business to form a habit of relying on subsidies, and breeding profit by the policy of "rent-seeking", and even developed non-agriculture M&A, it can cause the business performance decline, even will affect the development of the whole agriculture industry.Based on the above study, this article suggests:first of all, as the basic support of agriculture, the agricultural enterprises should be more cautious when deciding M&A strategy, selecting targets. They need considering enterprises’own resources, the industry characteristics and the future growth and then choose the right means of M&A, should also take the responsibility of the development of agriculture industry. Mixed M&A is able to for the agri-business to get short-term benefits, achieve the short-term performance targets, but with the constant changing of agricultural system and the continuous improvement of agricultural environment, if agri-business want to achieve the real growth, become a real leading enterprise, they must take the professional road by M&A. Second, in the case of choosing the appropriate scale of M&A, agribusiness should not be timid, within the scope of the critical mass, the M&A scale larger, the greater the firm growth. Moreover, when paying a premium for the target company in M&A, the agribusiness need fully considering the synergistic effect of condition, enterprises’profitability and the possibility of potential growth, performance, and compensation, reasonable premium can create better conditions for the sustainable growth in the future. Then, the government should increase the degree of tax benefits, increase the kinds of tax and amount of special preferential subsidies, and give full of fiscal subsidies in the process of M&A, but not giving subsidies blindly. Before giving the subsidies, the government should consider and investigate the purpose of M&A behavior, and give reasonable assessment on the agri-business management ability, if there are any irregularities affecting the development of agricultural industry, government should stop all aspects of preferential policies and give penalties on the firms, which can not only encourage agricultural enterprise to specialize in M&A, promote enterprise growth, but also can promote the healthy and orderly development of the whole agricultural industry. Finally regulators in reviewing the major M&A activities of agricultural enterprises should attach importance to investigate the long-term development of the enterprise, and be cautious on the agribusiness whose purpose is to get the short-term benefits by M&A. We hope to reduce the behavior of going after private benefits of control from the system and the supervision, if the behavior occurred, the supervision should give certain punishment; At the same time government should pay more attention to the non-agriculture M&A behaviors, if necessary, it need to establish the legislation to hit non-agriculture transformation behaviors.