Case Study On The Group Companies Lost-Control Of Subsidiaries:Impacts And Causes

In recent years,a large number of enterprises at home and abroad still choose M&A to expand their business territory and realize diversified development.The scale of China's M&A market has increased dramatically since 2003.In 2015,China's M&A market has set a new record.At the same time,it has set off a wave of mixed M&A.Many enterprises choose to enter the emerging industries through mixed M&A.In 2018,the M&A market remained hot.Looking back on 2017,M&A aimed at vertical integration and industrial integration gradually increased.However,many previously completed hybrid mergers and acquisitions started to emerge in 2017.After the completion of mergers and acquisitions,such adverse phenomena as failure of performance bet,impairment of goodwill and cashing out broke out.One widely discussed is in the subject matter of the M&A of listed companies went out of control and subsidiary refused to cooperate with annual audit causes a significant omissions in parent company's financial statements.It is difficult for financial indicators to simply reflect the impact of out-of-control subsidiaries.So we choose the event study method to explore the impact of this event on the stock price of listed companies.The conclusion shows that this event may have a negative impact on the stock price of listed companies.It is very important to face up to the problem of losing control of subsidiaries,avoid the risk of losing control,and increase the success rate of M&AFinancial indicators are difficult to reflect the impact of the event which the group lost control of subsidiary.Therefore,the event study method,which is often used to study the impact of unexpected events on the company,is selected to explore the impact of the loss of control of subsidiaries on the stock price of listed companies,so as to indirectly reflect the impact of the event on the company value.The results show that the loss of control of subsidiaries may have a negative impact on the stock price of listed companies.In order to avoid negative effects of the runaway events on listed companies as far as possible,this paper selects real cases of runaway events and tries to conduct specific research and analysis on them,in an attempt to obtain the possible causes of the loss of control of subsidiaries.According to the study on the cases of subsidiaries losing control,it is found that the subsidiaries in most of the cases are obtained through mixed mergers and acquisitions,so the Boya losing control event of Xinrihengli is selected as the specific case study.In 2015,Xinrihengli group,which is engaged in the metal manufacturing industry,made a cross-border acquisition of Boya,which is engaged in the stem cell industry,at a high price.However,at the end of 2017,Boya failed to fulfill promised profits,refused to pay compensation,refused to cooperate with the group's audit.Starting from this case,this paper first introduces the occurrence process and major schemes of M&A in 2015 and the process of the loss of control of Boya.Then from the M&A link,the integration link,the management link and other further detailed analysis,trying to find out the causes which may lead to the loss of control of the subsidiary.According to specific cases,this paper believes that the causes of Boya's loss of control may be related to the following aspects: high transaction price,highpromised-profit gambling agreement,cross-border-M&A risk,insufficient resource integration and improper group management,financial difficulties of the group,etc.These reasons may directly or indirectly jointly lead to the loss of control of the subsidiary.Finally,in order to avoid the subsidiary losing control as far as possible,ensure the long-term stable development of the group.This paper puts forward some relevant suggestions,hoping to help enterprises to improve the success rate of M&A and their ability to manage the subsidiary.