Analysis Of The Failure Of Performance Commitment Agreements In Listed Companies' Mergers And Acquisitions

Mergers and acquisitions,always known as the barometer of the capital market,play an irreplaceable role in optimizing the allocation of market resources.By the end of 2018,there have been 3446 M&A cases in China’s capital market,involving more than 400 billion yuan,of which 2404 are domestic M&A.Especially since 2008,mergers and acquisitions of listed companies have been surging,showing explosive growth in the number and amount of cases.How to ensure the effective implementation of mergers and acquisitions,reduce the risk of mergers and acquisitions,performance commitment and compensation system emerged as the times require.Since the emergence of performance commitment and compensation system,it has been widely recognized by the public.More and more M&A activities are inseparable from performance commitment and compensation agreement.However,the signing of performance commitment agreements is not once and for all.In recent years,many enterprises can not fulfill performance commitments,trigger performance compensation,and even lead to the failure of mergers and acquisitions.This paper takes Jiaozuo Wanfang’s acquisition of Wanji Energy as a case study.From the point of view of Jiaozuo Wanfang,the author uses case analysis method to explore the reasons for the failure of performance commitment agreement in the case of acquisition.This paper introduces the basic situation of both sides of M&A separately,and deeply analyses the valuation and pricing of underlying assets,performance commitment and its performance,as well as the results of performance compensation and treatment methods.Firstly,it analyses the reasons for failure of performance commitment agreement from the macro point of view,and obtains the established facts that both sides of M&A make high performance commitment and false high performance goal.Then,starting with the reasons of valuation,we use the binary tree valuation model to evaluate the underlying assets reasonably,and point out the institutional reasons for the failure of performance commitment agreement.Finally,we make a summary.Research shows that when signing performance commitment agreements,listed companies should pay attention to the valuation of underlying assets,choose reasonable and accurate valuation methods,try not to overestimate the value of assets,but also underestimate the value of assets.And according to the actual formulation of reasonable performance goals,make performance commitments in line with their own situation,and finally,in the process of production and operation should also be closely monitored.Through this case,I hope to provide some experience and suggestions for other enterprises using performance commitment agreement in M&A transactions.