Research On Application Of VAM To The M&A

More accurate definition for VAM is Valuation Adjustment Mechanism, which was born in the international venture investment. VAM continues to be applied and develop in Merger and Acquisition (M&A) over last decade in China. And it becomes a very important factor in deciding the final results of the M&A.Firstly, the author mainly analyze the domestic previous research about VAM, and the author based on the perspective of application VAM in M&A, through empirical research on cross-border M&A of ABB’s case, demonstrate the necessity and feasibility of VAM in the cross-border M&A with the PEST analysis and SWOT analysis. Secondly, the author through studying specific cases, shows the working mechanism of VAM including how to select the acquisition targets, to design the takeover scheme, to add the VAM terms, to perform the VAM and re-negotiate in the course of performing the VAM. Finally, the author make some appropriate recommendations for applying VAM in cross-board M&A, according to the working mechanism of VAM, combining the characteristics of M&A at home.The innovation of this paper as follows:firstly, for the first time linking the VAM with M&A, and illustrating the significance for applying VAM in cross-border M&A, where serious asymmetric information for both parties. Secondly, the author forces on the implementation of VAM, discloses the difference of actual situation in the merged corporation at beginning of concluding the VAM and after disclosing the interim performance of the merged corporation, and come up with adjusting the M&A standard and re-negotiate the VAM. Thirdly, the author studies and makes the conclusion on the DD before concluding the VAM, designing the VAM chip, the legality of VAM and the adjusting after changing the situation, which plays guiding role in the specific M&A.