Study On The Motivation And Risk Prevention Of Using The Valuation Adjustment Mechanism In Spearhead M&A

In recent years,with the rapid development of Chinese economy,mergers and acquisitions activities are increasing,but due to information asymmetry,mergers and acquisitions risks emerge one after another,among which the incidence of valuation risks remains high.In this context,most enterprises introduce the Valuation Adjustment Mechanism(VAM)from abroad to adjust the valuation risk and protect their owners’ equity.Based on the case study of the use of VAM in the process of Spearhead’s acquisition of D&S media,this paper analyzes the motivation and risk prevention function of the use of VAM,and tries to put forward some Suggestions on how to set VAM reasonably according to the enterprise’s own needs in the enterprise merger and acquisition.This paper focuses on the study of the motivation and risk of using the bet agreement in enterprise merger and acquisition,and selects the case of Spearhead’s merger and acquisition of D&S media to conduct the research with literature research method,quantitative analysis method and case analysis method.Firstly,the background and significance of the research are described,and the existing research and theoretical basis of M&A and bet agreement are reviewed.Secondly,this paper highlights the timeliness of this case study based on the current situation of enterprise merger and acquisition and the use of betting agreement,and emphasizes therepresentativeness of this case study by introducing the major merger and acquisition events of Spearhead and the case of Spearhead’s merger and acquisition of D&S media.In the process of case analysis,this paper combined the motivation for the signing of VAM between Spearhead and D&S media and the risk of M&A,and studied the risk prevention effect and implementation effect of VAM in the whole process of M&A.Among them,this paper focuses on the application of four categories of indicators in this case,including profit index,accounts receivable index,customer index and main business index.According to the case study,the four categories of indicators play a role of risk prevention in the process of the bet,and create a certain value for both sides of the merger and acquisition,with certain reference value and promotion significance.Through the case study,this paper comes to the following conclusions :(1)enterprises can set relevant gambling terms according to the characteristics and background of the industry,to meet the needs of the development of the industry;(2)in the setting of VAM,sufficient consideration should be given to the motivations and risks of merger and acquisition,and relevant provisions should be formulated based on their own needs;(3)the ultimate purpose of VAM is to promote the realization of synergies,and it should not be used as a tool to collect compensation.In the setting of specific terms,the acquirer should not be too strict and out of practice,and should be given a certain fault tolerance rate;(4)the diversification of the bet agreement helps to reduce the financial risk of a single indicator.The setting of non-financial index can help the acquirer to consider the actual development situation of the acquirer.At the same time,the setting of bet index has certain guiding effect on the future development of the acquired party.Through the case study of Spearhead bet on D&S media,this paper hopes to provide reference for other enterprises in the process of signing VAM,and promote the reasonable use of VAM in China’s enterprise mergers and acquisitions.