Research On The Risk Of Performance Commitment In M&A

Under the influence of the international and domestic economic climate,fierce market competition has forced more companies to join the team of mergers and acquisitions in order to enhance their market competitiveness.However,the associated risks associated with the expansion of M&A scale have gradually emerged.Even some companies have introduced a performance commitment mechanism to protect the interests of investors to deal with possible risks in the process of mergers and acquisitions.However,in the same trend as the steady growth of the number of performance commitments,more performance commitments are not up to standard.This phenomenon indicates that performance commitments will also bring new derivative risks to corporate mergers and acquisitions when preventing and controlling risks.Therefore,identifying and analyzing the risks of performance commitments in corporate mergers and acquisitions,and then implementing efficient risk prevention and control programs are practical issues that need to be resolved urgently.This article uses Kang Ni's acquisition of Longxin Technology as a case,combined with the actual situation of the merger and the performance of the performance commitment agreement,and conducts a classification study according to the different stages of the performance commitment.The study found that the failure to conduct duediligence during the signing of performance commitments boosted M&A premium risks and performance target setting risks;the risks during performance commitments were mainly the failure to integrate various resources of the acquired party in a timely manner,and weak supervision caused the chairman to violate the guarantee As well as the earnings management risk caused by performance pressure;after performance failure,Kang Ni Electromechanical accrued a huge impairment of goodwill and legal dispute risks followed one after anotherFinally,this article proposes reasonable measures to avoid the risk of performance commitment in the M&A process based on the risk points discovered.It conducts due diligence on the target company in advance,broadens M&A information channels,scientifically formulates M&A wars,controls M&A premiums through professional value evaluation,and makes reasonable settings.Target performance,pay attention to the actual operation of the target company,set multiple performance reference indicators;strictly prevent management shortcomingsDepending on the behavior,senior executives will be stationed in the target company to increase the supervision of the target company;improve the relevant laws and regulations on performance commitments;strengthen the information disclosure mechanism;and make suggestions on the cost of big promises.It is hoped to provide a reference for the use of performance commitments in the mergers and acquisitions of listed companies,strengthen risk management awareness,improve risk response capabilities,and increase the probability of achieving performance commitment goals.