Research On The Earnout In Enterprise Merger And Acquisition

Performance compensation commitment was initially used to reduce the risk of valuation and pricing in the process of M&A.However,with the passage of time and the end of the commitment period,performance compensation commitment system gradually exposed problems such as high valuation,High premium and low performance,which brought huge losses to the acquisition enterprises.Because of the defects of performance commitment in practical application,more and more enterprises begin to use Earnout to avoid the risks in the process of merger and acquisition.Earnout originated in the United States and Britain and other Western countries.It has been widely used abroad and has formed a complete research system.In China,Earnout has just started,and there are few relevant documents.In view of the representative application of Earnout in the case of Sanhua's merger and acquisition of Aweco,this paper hopes to analyze the case on the basis of existing research,further study the positive and negative impact of this scheme on merger and acquisition,and explore how to design Earnout scheme to maximize its role.In this regard,according to the introduction,literature review,research overview,case analysis,conclusions and recommendations of the five chapters,study the case indepth.The first two chapters introduce the background and significance of the topic,research content and methods,related concepts and literature review.Chapter three elaborates the origin,function and main content of Earnout.And the fourth chapters mainly introduce the process of Sanhua's M&A of Aweco,including the basic situation of both sides,the reasons for the initiation of M&A,the process of M&A,the specific design and implementation results of Earnout,and emphatically analyze the motivation and negative impact of the implementation of Earnout.The following conclusions are drawn:(1)Earnout can effectively reduce various risks in M&A.(2)Compared with one-time payment and performance compensation commitment,Earnout is the best choice for the acquired party to avoid the risk of M&A.(3)Although Earnout has obvious positive effect in the process of merger and acquisition,it also has many defects in the actual operation process.Finally,in view of the drawbacks of Earnout in the process of application,this paper puts forward corresponding suggestions to mergers and acquisitions and regulatory authorities.