Economic Cycle, The Method Of Payment And M&A Performance

Since the1990s, along with the rising tide of global mergers, the choice ofpayment method in acquisitions undergone tremendous change. In the More maturecapital markets of Europe and America countries, the choice of payment method is thebiggest change from the1980s which more businesses chose cash, to the1990s whichform a cash payment equal shares and convertible payment situation. In2005ourcountry, the payment of listed companies in acquisition is relative single, cash is themost important way, and since September2005started a pilot tradable share reform, thestock payment the emergence of payment, provided an opportunity for the acquisition ofour study relationship with M&A performance.When the acquirers decided to target corporate mergers and acquisitions, they facethree basic questions: First is payment issues; Second, is the financing arrangements andcontrol of structural problems; Third, is the resulting acquisition performance. Althoughdomestic and foreign scholars around the payment method and payment factorsaffecting the performance of M&A have done a lot of researches, and they achievedfruitful results. But the payment and the relationship between M&A performance isstill not clear, the payment for the acquisition of the performance impact remainedopenly. Although scholars have observed the effects of the fluctuations in the economiccycle to payment and M&A performance, but has yet to verify the relationship byempirical scholars among. For businesses and investors, payment as the most importantpart in M&A transactions, which choice will affect the success of mergers andacquisitions, the paper observed, with increasingly frequent M&A activity, China’s M&A performance was generally low. This shows that which companies and investors toconsider when choosing payment method is not very adequate, resources are notrational use and configuration. Which payment methods can provide a better M&Aperformance? Whether the economic cycle will affect the relationship between thepayment and performance of the acquisition? What kind of impact about economiccycle and M&A performance payment will bring? These are the problems which to besolved in this article.In this paper, mergers and acquisitions tax theory, asymmetric information theoryand the economic cycle theory, empirical research, to710cases of M&A events occurred in2006-2009as the sample, from an environmental characteristics of differenteconomic cycles, analyzes and acquisition payment M contextual performance. Impactof changes in this paper based on the M&A performance in previous studies,considering the investor when making payment choices vary due to the economic cyclein which market conditions such as asset price changes, and changes in the companyshare price performance of acquisitions. Through empirical analysis, the paperconcludes: Select a share-based payment acquirer performance is significantly higherthan the use of cash payments acquirer; under different economic cycles, there aresignificant differences in the relationship between payment and performance ofacquisitions; specifically in the economic expansion, the shares will give the acquirer topay a higher M&A performance, a significant correlation between the two; tighteningof the economy, the cash payment will give the acquirer higher performance andsignificant acquisitions. These findings give us a lesson: the payment choice,decision-makers must first enterprise in which according to the economic cycle isexpected to occur on the performance of M&A events were expected to select theexpected performance of a high payment. Similarly, in the analysis of the factorsaffecting the performance of acquisitions, payment method is one of the importantfactors, because in the other factors constant, the different payment methods withdifferent acquisition performance. Conclusions of this study, in theory, help to furtherdeepen the grasp of the laws of the acquisition payment, helps to reveal the relationshipbetween the economic cycle, payment and acquisitions between performance hasimportant significance for the rich to pay the acquisition theory; in practical aspects, toimprove the level of M&A payment decision to develop best practices for theacquisition of pay decisions, improve the success rate of mergers and acquisitions,enhance the value of the company has important guiding significance.