Discussion On Financial Risk Control Of Transnational Mergers And Acquisitions

In 2001,China joined the WTO.Recently,"One Belt and One Road",supply-side reform and other strategic arrangements proposed by China.These illustrate China's strategy of diversification and globalization.Thus,a large number of enterprises adopted the transnational merger and acquisition way to improve their international competitiveness,expand business scale and achieve international development.According to the data,the number of cross-border mergers and acquisitions of Chinese enterprises showed an explosive growth trend in 2016.The number of cross-border mergers and acquisitions increased by more than three times compared with 2015,and the cumulative amount of mergers and acquisitions reached 221 billion us dollars.The acquisition of Lexmark by Nine Star is one of the multiple cross-border mergers and acquisitions in 2016.Nine Star's acquisition of Lexmark cost 4.04 billion dollars.It equivalent to RMB 26.165 billion yuan,which was a huge amount.Meanwhile,Lexmark's overall strength and scale is nearly ten times larger than Nine Star.In order to successfully acquire Lexmark,Nine Star raised the acquisition price through loans from major shareholders and syndicated loans,and paid the acquisition price in full through cash.In the process of merger and acquisition,Nine Star's profit in the integration stage declined significantly due to the lack of financial risk control.Therefore,this paper takes Nine Star's acquisition of Lexmark as an example,and studies the financial risks in the process of transnational mergers and acquisitions.It helps to explore the methods of financial risk control and provide reference for other Chinese enterprises in cross-border mergers and acquisitions.This paper first summarizes the scholars' theoretical research on the financial risks and control of transnational mergers and acquisitions through literature search,and then sorts out the motivations,financial risks and control of transnational mergers and acquisitions of enterprises from the macro level.Through the above analysis,the basic framework and research ideas of this paper are constructed.Then,combining with the specific case of Nine Star's acquisition of Lexmark,this paper analyzes the financial risks from the four aspects of pricing risk,financing risk,payment risk and integration risk,and puts forward the corresponding control Suggestions for the financial risks.The analysis results show that the main reasons for Lexmark's acquisition of Lexmark are as follows.First,Nine Star and Lexmark have different business areas,and Nine Star hopes to expand market share and achieve synergies through this acquisition.Secondly,acquisition of Lexmark can help Nine Star to achieve the comprehensive development of middle-and low-end businesses to high-end businesses,improve the enterprise industry chain and save transaction costs at the same time.Thirdly,Lexmark has made a loss on its profits after the acquisition of Kofax,and Nine Star hopes to seize Lexmark's undervalued position to create more profits for itself.Nine Star has the following financial risks in the process of acquiring Lexmark.First of all,due to the influence of information asymmetry,enterprises in the process of transnational mergers and acquisitions will be unable to form a reasonable merger and acquisition pricing.In this case,Nine Star,as a private enterprise,has insufficient international negotiation ability,which is likely to result in high pricing and loss of its own economic interests.Secondly,Nine Star was unable to pay independently due to the high pricing of the merger and acquisition,so it raised funds through borrowing.Due to the large amount of loan,Nine Star generated a large number of financial expenses after the completion of merger and acquisition,resulting in negative operating profit of the enterprise and great debt repayment pressure.Thirdly,the acquisition price of Nine Star was paid in cash,which made its cash flow drop sharply.Through the analysis of the financial statements of Nine Star from 2015 to 2017,it can be seen that the cash ratio of Nine Star has decreased by more than 20 times.If the enterprise is in urgent need of cash expenditure in the later period of operation,it may face the risk of cash shortage.Finally,in the financial integration stage,due to the different financial systems of the two parties,Nine Star r needs to spend some time to unify the financial management system of Lexmark and ensure the continuity of its financial treatment.In this process,it is easy to generate integration risks due to the difficulties of the two parties.By analyzing the financial risks above,this paper believes that it can be controlled from the following aspects.Firstly,enterprises can expand information access channels and enhance information symmetry with the help of professional intermediary agencies,and enhance their core competitiveness to strengthen international negotiation ability,so as to form reasonable pricing and control pricing risks.Secondly,enterprises can enrich their financing channels and innovate financing channels so as to reduce the amount of borrowing and reduce the debt repayment pressure in the later stage.At the same time,enterprises need to fully evaluate their ability to borrow money and make full use of the positive effects of financial leverage.Thirdly,for the control of payment risk,enterprises need to enrich their payment methods and reduce cash payment activities,so as to maintain the stability of cash flow.Finally,in the stage of financial integration,enterprises need to evaluate the financial management system of the merger and acquisition parties,and explore appropriate accounting system,so as to gradually integrate the financial management system of the merger and acquisition parties.And strengthen the control of financial personnel changes to ensure the continuity of financial processing.When necessary,it may use the bet agreement to protect its own interests and reduce the loss caused by the merger and acquisition.