Research On High Valuation And Related Risk Management In M&A

Some domestic listed enterprises in recent years are through M & A strategy to achieve their own sustainable development capacity,innovation ability and market competitiveness,but there are some failures.Performance commitments can not be completed,high valuations have the potential to promote the acquisition and reorganization of listed enterprises goodwill impairment,resulting in huge losses for the company.Xinri Hengli for the Paper Research sample case,October 26,2015,the Xinri Hengli through cash payment,the purchase of Boya stem cell 80% stake.At the same time,the two sides signed a performance commitment,Boya stem cells need to complete 30 million yuan,50 million yuan,80 million yuan,120 million yuan performance commitment in 2015-2018.Xinri Hengli because of the non-same control under the acquisition of Boya stem cells produced 1,212,744,600 yuan goodwill.2016,due to Boya stem cells in 2015 years did not complete the performance commitment,after the impairment test,the high goodwill impairment directly made the new day constant force 2016 loss.The analysis of this paper is due to the new day constant force in its own development pressure,constant loss,attempts to diversify the development of the background of the acquisition of Boya stem cells,but due to the selection of valuation methods and the lack of understanding of emerging industries,and ultimately resulting in the valuation of Boya stem cells too high,resulting in a huge goodwill.At the same time signed a higher performance on the betting agreement to control the valuation risk,but because Boya stem cell profitability can not meet the performance commitment,triggered the goodwill impairment risk,not only did not achieve the risk of prevention and control valuation,but to the detriment of the company's interests.This article focuses on the risks associated with high valuations,as well as the risk of goodwill impairment due to high valuations,and the precautionary measures used by companies to cope with high valuations-the risk of performance betting.After systematic analysis,this paper draws the following conclusions:(1)High valuation is the origin of M&A risk arising from the current Xinri Hengli.Listed companies should take a rational view of the profit potential of M & A,reasonable valuation,so that goodwill returns to its essence;(2)Performance to gamble agreement to consider feasibility,higher unreasonable performance commitment can not guard against valuation risk,but in the absence of completion will trigger goodwill impairment risk,harm the company's interests(3)High valuation risk should be through the early careful selection of the target industry and due diligence of the underlying enterprise,from the internal control process,set up a reasonable selection mechanism for evaluation institutions,let the internal audit department to evaluate audit supervision,and supplemented by the selection of reasonable evaluation methods to prevent;(4)Purification Goodwill Confirmation,Avoiding high goodwill brought about by higher performance commitments,while establishing a reasonable way to evaluate goodwill and improving the subsequent measurement of goodwill,is essential to reduce the risk of goodwill impairment.