Research On The Motivation And Economic Consequences Of China’s Enterprises’ Merger And Acquisition Under The Background Of Supply-Side Structural Reform

The supply-side structural reform proposed in 2015,which covers the "Three go,one drop,one supplement" measures,has proposed to solve the excess capacity of coal,steel,real estate and other industries,reduce inventory,mitigate excessive debt crisis,and reduce enterprise cost and expansion of effective supply.Considering the mergers and acquisitions activities of central enterprises in recent years,the reasons for the mergers and acquisitions of central enterprises can be attributed to three points.First,the promotion of policies has kicked off the mergers and acquisitions of central enterprises.The second reason is the promotion of share reform in the overall promotion.Considering the uncertainty brought by the share reform to the full circulation environment,some central enterprises are more inclined to accelerate mergers and acquisitions.The third reason is the fierce competition in the industry which has led many central enterprises to try to enhance their competitiveness in the industry through mergers and acquisitions.Under the background of structural reforms on the supply side,whether the mergers and acquisitions of central enterprises have achieved their goals,what risks they will face in the process,what measures should be taken to deal with these risks,and what economic consequences are caused will be of reference to improve the ability of mergers and acquisitions as well as comprehensive competitiveness of central enterprises.This paper takes Baowu M&A as the research object and analyzes the motivation,operation process,risk and response,economic consequences,financial performance and market reaction of Baowu M&A.Finally,it concludes that Baowu M&A is an important breakthrough of the supply-side structural reform of China’s steel enterprises.It plays a role as a model for the supply side reform of the steel industry and the enhancement of the international influence of China’s steel enterprises.The first chapter is the introduction,expounding the research background,the theoretical and practical value of the research,the research methods,the research framework,the innovation of the paper and the definition of related concepts-including supply-side structural reform,overcapacity,and mergers and acquisitions.The second chapter is the theoretical basis and literature review.This chapter mainly introduces the theory of scale benefit,market power theory,efficiency theory and synergy effect theory,and reviews the literature on the motivation and economic consequences of central enterprise mergers and acquisitions.The third chapter is the motivation and risk of central enterprise mergers and acquisitions under the background of supply-side reform.Combining relevant theories,it is divided into the traditional motivation of central enterprises’ mergers and acquisitions—realizing government intentions,realizing agent’s goals,realizing the synergy effect of mergers and acquisitions,and tapping potential value;The motivation after the implementation of the reform-to resolve excess capacity,reduce inventory,mitigate excessive debt crisis,reduce costs,expand effective supply,and introduce the risks that may exist in the mergers and acquisitions of central enterprises.The fourth chapter is the introduction and analysis of the case,the introduction of the acquisition of Baosteel WISCO and the operation process of the merger and acquisition.Through the study of this case,it is found that the motivation of Baowu M&A is reflected in two levels:macro level and micro level which include responding to national policies and resisting foreign investment Infiltrate,increasing industrial concentration,resolving excess capacity,improving management level,optimizing operational efficiency,and reducing financial risks.It also shows three risks of Baowu M&A including human resource integration,asset integration,business integration.Then comes the fifth chapter.Through the financial indicator method and case analysis method,it is found that the performance of Baowu M&A is positive,and the three indicators of profitability,debt capacity and operational capability are all stable,and the positive signal of the market can also be obtained through the calculation of the cumulative excess return rate.With the slow release of synergies and the gradual improvement of the fundamentals of the industry,Baowu M&A will further achieve economies of scale,stimulate industry vitality and enhance the overall competitiveness of the steel industry.The sixth chapter is the conclusion and enlightenment.It summarizes the valuable experience gained during the acquisition of Baowu and provides inspiring references and suggestions for the steel industry,central enterprises and the government.