Risk Analysis Of "Snake Swallow Elephant" M&A

After the subprime mortgage crisis,the global economy slowly recovered,and the merger and acquisition activities between Chinese companies have also increased.In 2015,China completed 7123 mergers and acquisitions,bringing the total to 3.2 trillion yuan,according to Wind.The number of deals in China's mergers and acquisitions activity fell in 2016,but the total amount of transactions remained unchanged.In 2017,there were 10866 mergers and acquisitions transactions in the Chinese M&A market,with a total transaction volume of 5.05 trillion yuan,an increase of 102.42 % year-on-year,and an increase of 54.45 % year-on-year.In 2018,a total of 12186 M&A transactions took place in the Chinese M&A market,with a total transaction value of 336000 billion yuan.Mergers and acquisitions among enterprises can be divided into strong mergers and acquisitions,strong and weak,weak and strong,and weak mergers and acquisitions.Looking back at the situation of M&A s in China over the years,most M&A s take a strong and weak form,but with the increasing scale of M&A S,the number of M&A S and the amount of M&A s are increasing.China began to appear some small and large corporate mergers and acquisitions with weak and strong "snake swallow elephant" type of mergers and acquisitions slowly increased.The "snake swallow elephant" M & A has appeared frequently in China's M & A market in recent years.The "snake swallow elephant" merger and acquisition refers to a merger and acquisition method in which the assets and operating income of the merger and acquisition parties are much smaller than those of the merger and acquisition parties.The emergence of the "snake swallow elephant" merger and acquisition has benefited from the development of leveraged mergers and acquisitions.The innovation of the merger and acquisition method has made the "snake swallow elephant" merger and acquisition possible.Under the "snake swallow elephant" M & A mode,M & A parties will use financial leverage or issue shares to raise funds to achieve the purpose of M & A.The key to the "snake swallow elephant" merger is whether the "snake" can eventually swallow the "elephant." The opportunities offered by "snake swallow" mergers and acquisitions also carry enormous risks that could result in post-merger companies performing poorly and not being able to repay their debts,causing debt crises and even bankruptcies.This is the failure of the "snake swallow elephant" type of merger and acquisition is the "snake swallow elephant" type of mergers and acquisitions after indigestion.It is of practical significance to analyze the risk of "snake swallow elephant" M & A after M & A.The Kennedy Energy merger case is the largest restructuring and acquisition in the history of GEM.After Wotema's acquisition by a premium of 4.6 times,he became a new player in the lithium battery industry.The net profit of the merger and acquisition year soared by 11 times,but in 2017 and 2018.In the first quarter,it suffered a debt crisis due to a huge cash flow.This paper first analyzes the merger from the two aspects of merger and acquisition financial performance,and then focuses on the risk of Jianrui merger and acquisition before and after the risk and the cause of debt crisis.It is concluded that there are policy risks,goodwill impairment risks,financing risks,integration risks,operational risks and debt repayment risks in the process of "snake swallow elephant" mergers and acquisitions.And put forward the "snake swallow elephant" in the merger and acquisition of enterprises to prevent risk suggestions: pay attention to changes in industry policies,strengthen the enterprise's valuation capacity,optimize the financing capital structure,formulate a careful integration plan,strengthen the enterprise cash flow management.With the increasing number of "snake swallow elephant" mergers and acquisitions in China,enterprises should pay more attention to the risk of "snake swallow elephant" mergers and acquisitions,and understand the reasons for each risk and the impact on enterprises.This paper expects to give some enlightenment to the risk problem in the future of the enterprise in the "snake swallow elephant" merger and acquisition.