Research On Performance Commitment And Tis Consequences In M&A

As a common means of enterprise expansion,Mergers and Acquisitions can not only obtain advanced technology and rich management experience of enterprises in a short time,but also expand production scale and quickly occupy new field market,which is an important way for enterprises to improve profitability,realize scale expansion and complete strategic adjustment.At present,there are some companies in China's manufacturing industry,which are weak competitiveness and perennial losses for their own technical disadvantagees,and M & A can bring a more competitive advantage to the business,get rid of financial predicament and avoid the risk of Brexit.However,the current phenomenon of performance commitment is widespread,which not only results in high M & A premium,but also brings a series of follow-up risks to enterprises.Therefore,how to reasonably formulate the performance commitment agreement is particularly important to alleviate the information asymmetry in the process of mergers and reorganizations and to control the future operationrisk.In this paper,we select the two cases of Jiadian and Steyr,compare and analyze the performance commitment and its influence under the same shell-retaining motivation.First of all,this article combs and collates the research of the motivation and the performance commitment.Secondly,this paper combs the M & A events from three aspects.Thirdly,this paper combs the forecast profit value,compensation method,adjustment and potential risk of of the performance commitment.The study finds that the forecast net profit of performance commitment is high,and that makes the company's performance commitment impossible to complete.Then,this paper analyzes the concrete implementation and results of the performance commitment of two companies.Research shows that,on the one hand,performance commitment implementation leads to overvaluation of the underlying enterprise;On the other hand,if the forecast profit cannot be realized,the stock price is affected,the company executives leave the job for not completing the performance commitment.In addition,this paper studies the subsequent impact of performance commitments,and finds that performance commitments push up the valuation of the underlying enterprises,resulting in high risk of goodwill impairment,and the withdrawal of institutional investors undermines the interests of minority shareholders;In order to achieve performance commitments,companies may have earnings management and financial fraud,which will lead to a decline in the quality of earnings after the expiration of the performance commitment,if financial fraud is found,the company will be subjected to administrative penalties,share prices will be affected,audit costs will rise.Finally,this paper gives the conclusion and suggestion,this paper holds that the companies for Shell-retaining motivation have realized their original purpose,and also changes the enterprise's ownership structure,main business,strategy and customers and suppliers,but in the process of realization,there is a high performance commitment phenomenon,This high performance commitment has resulted in overvaluation of the enterprise,poor long-term performance,impairment of goodwill,high risk of performance commitments that cannot be completed;This paper gives some suggestions: enterprises in the process should scientifically design performance commitment objectives,evaluate the future performance of the target enterprises,strengthen corporate governance,strengthen oversight of performance commitments.