Analysis On The Risk And Control Of Chemchina's Cross Border M&A Syngenta

Benefiting from the implementation of national policies such as the “Belt and Road”,the scale,number and amount of cross-border M&A transactions by Chinese companies have all repeatedly hit record highs,and the development rate has been staggering.On the one hand,in recent years,Western developed countries have implemented extensive financial reforms,relaxed restrictions on capital activities such as credit,securities investment,and cross-border mergers and acquisitions,and have liberalized financial regulatory policies.Multinational corporations can raise M&A funds more smoothly.On the other hand,in order to reduce reliance on a single product and strengthen the control of the upstream and downstream markets of the industry,companies have implemented more diversified business strategies and internalized the external market to reduce intermediate costs and transaction costs.The internationalization of Chinese-funded enterprises has accelerated,and a new wave of cross-border mergers and acquisitions has taken shape.Multinational mergers and acquisitions have become an important means for enterprises to expand their scale and seize international market shares.However,there are still some problems in our country's cross-border M&A,such as lack of in-depth understanding of the target company,cash payment as the main payment method,and insufficient integration capabilities in the later stage of the cross-border M&A.Cases of failed cross-border mergers and acquisitions broke out repeatedly.In June 2017,CHEMCHINA formally completed its acquisition of Syngenta.The US$430 billion offer price refreshed the domestic transaction record.CHEMCHINA's rich cross-border M&A experience over the years is worthy of discussion and research.This paper firstly introduces the meaning of cross-border M&A,cross-border M&A risk and control using literature research method and case analysis method.It briefly introduces the types of cross-border M&A risk in three stages,based on the theory of synergy effect and risk management The case analyzes the risks in the process of cross-border M&A of CHEMCHINA.It was found that CHEMCHINA had multinational legal risks and approval risks during the preparatory stage of mergers and acquisitions,as well as high premium risks caused by inaccurate valuations;there were financing risks due to large exchange rate fluctuations and excessive funds during the mergers and acquisitions stage and cash payments Risks such as debtpressure;financial integration,differences in corporate culture,and the risk of brain drain after mergers and acquisitions during the integration phase of mergers and acquisitions.In the fifth part of this article,we summarize the risk control measures adopted by China National Chemical Corporation.Finally,it draws conclusions and revelations on practical risk control of cross-border mergers and acquisitions,and provides references for cross-border mergers and acquisitions of other enterprises.The analysis found that the cross-border M&A case has the following risks: The legal risks faced by CHEMCHINA include the Chinese government approval risk and the relevant national antitrust approval risk;the high M&A premium risk in the value assessment is manifested in intangible asset valuation risk and financial Statement risk;large exchange rate fluctuations increase the cost of M&A and greatly affect the exchange rate risk of M&A activities;high M&A funds bring financing risks,leading to the possibility of a capital chain breakage;complete cash payment brings debt repayment The pressure has increased the debt-servicing burden of the company;the financial integration risk is manifested in Syngenta's operating income,profitability has fallen sharply,and the two financial management systems are independent of each other;there is a difference in the corporate culture of the two parties,and the cultural identity is weak;post-merger talent There is a greater risk of turnover,and there are frequent departures.The summary summarizes the risk control measures adopted by CHEMCHINA as follows: established an effective exit mechanism and break-up fee mechanism;hired an independent third party to perform due diligence and value assessment;used derivative financial instruments to hedge exchange rate risk;and established a multi-tier trading structure and spv company Meet the needs of financing and reduce the risk of financing structure;reasonable refinancing arrangements replace short-term funds with long-term funds;control financial integration risks by setting specific financial management objectives,unifying and improving financial management systems and optimizing capital structure;adopting an orderly approach The cultural integration work deepens each other's cultural identity;establishing effective communication channels and retaining the independence of the merged company reduces the risk of talents leaving.