Analysis Of Failure Case Of Profit Forecast Compensation Agreement In M&A

In recent years,with the improvement of the capital market and the completion of the reform of state-owned enterprises,more and more listed companies begin to carry on mergers and acquisitions reorganization,but how to price the underlying assets is always the focus of attention.Even in the last two years of mergers and acquisitions,premium mergers have been increasingly accepted.In order to effectively combat the irregular pricing phenomenon,to ensure that the rights and interests of small and medium-sized investors are not harmed and to speed up the steady development of mergers and acquisitions market,China's listed companies adopt the profit forecast compensation mechanism in the process of merger and reorganization.However,the subsequent merger and acquisition reorganization "Sequela" also began to emerge,the performance is more and more,the profit forecast compensation system in the avoidance of mergers and acquisitions risk,but also derived a new risk.After combing the literature on the merger risk and profit forecasting compensation agreement,we found that the merger risk and profit forecast compensation agreement as the research object less,the profit prediction in mergers and acquisitions risk avoidance effect of less concern,this article will take Fujian Dickinson of Liancheng Orchid merger and reorganization failure as an example,Finally,we discuss and analyze the merger and reorganization of the contract which has failed.Based on the theory of real options and the application principle of profit prediction compensation agreement,this paper first analyzes the compensation agreement under the background of real option theory,mainly finds that it has the following three characteristics: first,the investment is irreversible,the other is uncertainty of the market environment,and the third is the flexibility of decision-making.Through the analysis of the application principle of the Profit forecast compensation agreement,it provides the thinking direction for the application of the profit forecast compensation agreement and the risk analysis.Using case study method,taking Liancheng orchid from Fujian Dickinson as an example,this paper makes a simple carding of cases from the background of mergers and acquisitions and the process of merger and acquisition.This paper probes into the reasons for the invalidation of the profit forecast compensation agreement by analyzing the motives of the Dickinson and Liancheng Orchid in Fujian,the arrangement of compensation time arrangement,the setting of compensation alignment,the matching degree of the profit forecast compensation and the equity,and the real performance of Liancheng Orchid.It is found that because of the irrationality of the Treaty and the bad quality of the company's assets,the profit promise can not be realized,which increases the risk of the merger failure.Finally,through the above analysis,it is concluded that although the profit prediction compensation agreement will play a regulatory role in the merger and acquisition risk,the profit forecasting compensation agreement also has the risk of being unable to be cashed because of the influence factors of the agreement itself and the quality of the underlying company assets.Through the analysis of the problems existing in the profit forecast compensation agreement in the Enterprise merger and reorganization,the research thinks,the acquirer should not take the profit forecast compensation system as the magic weapon to evade the risk,should set the line right standard rationally,put the focus on the design of the trading plan and the choice of the company,in addition to make full use of the professional The professional ability of the Organization to correctly evaluate the value of the enterprise.