Valuation Adjustment Mechanism In M&A And The Protection Of Minority Shareholders

The �three high� issues of high valuation,high pricing and high valuation adjustment mechanism have been widely criticized in recent years for mergers and acquisitions of listed companies.The performance of the underlying assets has changed and the stock price has been plummeted,which has seriously damaged the legitimate rights and interests of shareholders.Under this circumstance,large shareholders can convey their interests through dividend policy and related party transactions,while minority shareholders are vulnerable to infringement of their legitimate rights and interests due to their weak ability to resist risks and self-protection.Small and medium-sized investors are the main participants in China's capital market at the present stage.It is of practical significance to explore the way to protect the interests of minority shareholders.This paper chooses the case of SDG information's acquisition of Shenzhen Dongzhi and Chengdu Fuliye,trying to analyze the ways to protect interests of minority shareholders through valuation adjustment mechanism,from the perspective of positive case.On the basis of literature review,this paper outlines the development status and theoretical basis of valuation adjustment mechanism in China,introduces the basic situation of the case,verifies that the valuation adjustment mechanism in the case has protected the interests of minority shareholders.By analyzing the implementation of merger and acquisition scheme and the clauses of valuation adjustment mechanism,this paper tries to explore the experiences which can be used for reference and then draws conclusions and enlightenment,so as to provide reference for the protection of the interests of minority shareholders in the future.This paper draws the following conclusions and enlightenment.Firstly,excessive realization of valuation adjustment mechanism can protect the interests of minority shareholders.The paper uses the event method to verify that security market has a positive response to the valuation adjustment mechanism in the short term.Through the analysis of financial indicators before and after the valuation adjustment mechanism,the paper finds that the profitability,operation ability and development ability of listed company has been improved after the achievement of valuation adjustment mechanism,and the value of listed company has increased significantly,which fundamentally safeguards the legitimate rights and interests of minority shareholders.Secondly,for merger and acquisition traders,the ways of protecting the interests of minority shareholders through valuation adjustment mechanism include the following four points.Firstly,setting a reasonable valuation adjustment mechanism base by the acquired party can reduce the risk that the valuation adjustment mechanism is too high to be realized and provide investors with rational expectations.Secondly,reasonable selection of highquality targets by acquirers can fundamentally avoid the problem of the infringement of listed companies and investors due to underperformance of the underlying assets.Thirdly,the establishment of excess performance incentives by acquirers can prevent moral hazards of the management in the acquired party,encouraging them to work hard and enhance the value of the targets.Fourthly,the acquirers and the acquired party jointly extend the lock-up period,which will reduce information asymmetry,and jointly establish a barrier to protect the interests of minority shareholders.Thirdly,on the issue of the protection of minority shareholders by valuation adjustment mechanism,this paper puts forward some suggestions for regulators,merger and acquisition traders and minority shareholders respectively.Regulators should improve the civil compensation system to raise the cost of violation of laws and regulations,which is conducive to effectively protect the interests of minority shareholders.On the one hand,merger and acquisition traders should reasonably use the income method to valuate,so as to reduce the risk that the premium rate of valuation is too high to achieve the valuation adjustment mechanism.On the other hand,they are advised to extend the lock-up period to prevent reduction of shares taking advantage of inside information and infringement of minority shareholders.Small and medium-sized investors should strengthen their ability to identify information in security market,heighten the level of decision-making and take initiative to protect themselves.