M&A Motivation And Performance Of China Security & Fire Co.,Ltd.

Since China's reform and opening-up,the market economy has become more and more important in the national economy.As a market participant,enterprises play an important role in participating in the operation of the market economy.With the development of enterprises,more efficient enterprises in the market are expanding rapidly.There are generally two paths for the expansion of enterprises.One is intensive development,through continuous expansion of core business,which means improving product service quality.Through its innovative and creative capabilities,it continuously enhances its core competitiveness and thus expands its scale.Another is extensional development,in which enterprises rely on mergers and acquisitions to continue to expand the scale,extend the industrial chain and other ways to achieve enterprise expansion.Each of these has its own characteristics.The connotative development enterprise not only expands its own capabilities through in-depth exploration of its own capabilities,but also expands its scale through innovation.The advantage of this approach is that the company is stable by relying on its own strength to develop.However,the disadvantage is that enterprises are more likely to face bottlenecks in development,and it is difficult to break through the bottleneck of development,which will lead to the stagnation of enterprises;in addition,the expansion of corporate intensive development is generally slow.The extensional development can overcome the bottleneck problem encountered in the connotation development to a certain extent.Enterprises can acquire advanced technology through mergers and acquisitions,and the M&A method can make company rapidly expand in the short term,seize the market,increase the share,and possibly Reach "1+1>2".To this end,some companies may even have continuous mergers and acquisitions.Continuous M&A means to a company that acquires multiple companies in a short period of time,and the actions are very frequent.The motivation for companies to implement continuous mergers and acquisitions is multifaceted.First of all,continuous mergers and acquisitions can help enterprises to expand rapidly,achieve a greater leap,rapidly expand scale,and quickly integrate and improve the industrial chain.It also can help companies occupy a larger market share for occupying an advantage in the competition with the industry.Second,the occurrence of continuous mergers and acquisitions also carries the will of the management of the merger and acquisition.Because of the continuous mergers and acquisitions,while helping the rapid expansion of enterprises,it will also bring up the stock price of listed companies.On the one hand,the rise in stock prices can increase the company's market value,increase the management's position in the industry,and pursue the status while also bring management's salary improvement.On the other hand,the rise in stock prices can help management gain access to financing,allowing management to obtain substantial financing in the short term to implement further actions.However,if the failure of continuous mergers and acquisitions will become a burden on the enterprise,it will drag down the development of the enterprise.Therefore,it is necessary for us to analyze and discuss the continuous merger and acquisition behavior of enterprises.This paper takes China Security & Fire Co.,Ltd as an example to analyze the motivation of China Security & Fire Co.,Ltd's(CSF is called for short)continuous mergers and acquisitions from 2014 to 2017 and the impact of its continuous mergers and acquisitions on CSF's performance.The motivation for the continuous mergers and acquisitions of CSF is multi-faceted.From the perspective of the external environment,China's economy has experienced the rapid development period since the reform and opening-up,and has entered the new economic normality,which includes the development of kinetic energy conversion,industrial restructuring and the mismatch between domestic demand and supply quality.Under such an economic background,CFS absorbs advanced technology and management experience through continuous mergers and acquisitions,continuously expands its scale,extends the industrial chain,and explores overseas markets relying on the financing platform and capital advantages of listed companies after the back-door listing,which is its external motivation for continuous mergers and acquisitions.At the same time,the management of CSF Consumers also has its own interests.On the one hand,it acquires advanced technology and acquires advanced management experience through mergers and acquisitions of overseas high-quality assets to enhance the management capabilities of CSF Management.On the other hand,the management of CSF Consumers also realized the high growth and the rise of the stock price after the back-door listing through the implementation of continuous mergers and acquisitions.The rise of the stock price brought the financing convenience to the management of CSF Consumer,and the actual controller through has received a lot of financing the pledge approach.This is the internal motivation for Zhong An's implementation of continuous mergers and acquisitions.In terms of the impact of continuous mergers and acquisitions on CSF's performance by analyzing in improved version of DuPont's financial indicator system,due to the special nature of continuous mergers and acquisitions,enterprises choose to pay for cash by way of mergers and acquisitions,in order to meet the purpose of large-scale mergers and acquisitions in the short term.The consumption and financing of supplementary funds are the main factors affecting the performance of CSF.In the short-term,CSF Consumer's short-term financial effect in the process of continuous mergers and acquisitions is significant,and the stock price increase has brought rich returns to shareholders.However,due to the large amount of cash payment,the short-term solvency of enterprises has been weakened.Moreover,CSF Consumer has formed a mismatch of assets through short-term liabilities to make up for liquidity.The emergence of debt default is an alarm for CSF's unreasonable financing.In the long run,the wealth effect of CSF's mergers and acquisitions continues to decline.Not only in the capital market,the operating capacity of CSF Consumer has declined.Although China's M&A strategy has achieved high growth,it indicates that continuous M&A behavior has damaged CSF's profitability from the three indicators of net interest rate,equity net interest rate or EVA return rate.In the long run,continuous mergers and acquisitions have had a negative impact on the performance of CSF Consumer.This paper concludes that the selection of M&A objects,the determination of payment considerations,the payment method and the matching financing plan are the key issues in the implementation stage of continuous M&A by analyzing the model of continuous mergers and acquisitions.In terms of the impact of performance,enterprises should scientifically select M&A targets and determine payment considerations,prevent and control the ?valuation bubble? risk,and rationally use performance commitments to achieve M&A integration when implementing continuous mergers and acquisitions.One should establish a comprehensive performance evaluation system through long-term and short-term performance combination.In order to form a full process control of continuous mergers and acquisitions.