A Research On The Motivations And Performance Of Mengniu Acquiring Yashili

Merger and acquisition(M&A)is a short cut to the expansion of the enterprise,which can expand the firm's size and increase the market share.In recent years,there are many M&A events in China's dairy companies,and the case of Mengniu acquiring Yashili is the biggest and most influential in the industry.The study on the motivation and performance of this acquisition will provide a reference and lessons to other companies in the dairy industry and other industries.Firstly,based on the theories of M&A,started from the dairy industry background,and combined with the SWOT analysis for Mengniu and Yashili,this paper explores the motivations behind this acquisition,including the synergy effect and the agent problem.Secondly,this paper examines the market performance and financial performance from this acquisition,using the event study approach and financial ratios analysis method.The results show that,for the short-term market performance,the market reaction to this acquisition is positive;however,for the long term market performance,the shareholders do not benefit from this acquisition;for the financial performance,almost all financial ratios became worse after this acquisition;and the synergistic effect is not achieved.Through motivation and performance analysis,this paper concludes that:(1)for the Mengniu,this acquisition really makes up its weakness in milk powder production and forms the entire dairy industrial chain;(2)due to the inefficient integration about human resources,brand sand channels,this acquisition does not result in the synergies;(3)the bad performance from this M&A can be explained by the agency problems motivation behind this acquisition.The agency problems mainly reflected in management's overconfidence for this acquisition.The management underestimates the difficulty of Yashili,and overestimates their ability to complete the integration after M&A.Accordingly,the paper gives the suggestions for the firms who want to conduct M&A(1)avoiding management overconfidence in the M&A process;(2)strengthening the integration after the M&A.