| The economic growth in China has entered a shifting period in recent years,and the problems of overcapacity and structural inefficiency have gradually emerged.The economic structural transformation becomes an important issue under the new normal stage of China.The macro background of transformation also drives the transformation of enterprises,and cross-industry M&A becomes an important way for listed companies to complete business transformation and to achieve diversified development.However,changes in the regulatory environment have brought new challenges,and cross-industry M&A of listed companies causes more controversy.Some listed companies,especially those traditional companies that are in urgent need of transformation,can not prevent from falling into severe financial conditions after taking cross-industry M&A.Therefore,the financial risks in cross-industry M&A deserve a more in-depth discussion in micro cases.On the basis of the relevant literature and theories of previous scholars,this paper analyzes the characteristics of cross-industry M&A of listed companies in the context of transformation and makes an overview of the financial risks of crossindustry M&A.This paper selects the typical case of Baihuacun Co.,Ltd.merging Nanjing Huawei as the research subject,and analyzes its financial risks from pricing,financing,payment and integration.Moreover,some financial indicators and the FScore risk model are used to further evaluate the overall financial risk in this case.This paper also provides some financial risk prevention measures for the other listed companies to complete cross-industry M&A,and it also provides some references for the regulatory body to formulate the relevant policies.The main research conclusion of this paper can be summarized as follows:Cross-industry M&A has some characteristics in terms of transaction size,industry selection,payment methods,evaluation methods and performance commitments.And the listed companies will face financial risks in the processes of pricing,financing,payment,and integration under cross-industry M&A.In terms of pricing risk,the information asymmetry in cross-industry M&A is further deepened,and the limitations of the income method are also magnified.Besides,the assets disposed by the acquirer further affect the pricing risk,too.Under the multiple factors of the acquirer itself,the Strategic investors and the acquired company,Baihuacun Co.,Ltd.faced the serious information asymmetry and paid excessive premiums under the influence of the defects of the income method,and the high valuation also caused the goodwill devaluation and made the acquirer get into the financial trouble.In terms of financing and payment risks,some listed companies have overdrawn their financing capabilities in the context of transformation.Facing the high price in cross-industry M&A,the listed companies may take some extreme means of financing and payment.In this case,Baihuacun Co.,Ltd.took the financing and payment measures mainly through issuing shares due to the liquidity pressure of the coal industry and caused the serious equity dilution risk,which also brought challenges to the subsequent integration.In terms of integration risk,due to the uncertainty of cross-industry M&A,both parties generally sign performance commitments,and in order to successfully complete the transformation,the acquirer usually gives more management power to the managers of the acquired company,but the managers of the acquired company are more likely to make financial fraud and that will seriously affect the overall interests of the listed company under the information asymmetry.In addition,if there are no effective integration measures,the industry differences will also cause the serious financial integration risk and the cultural integration risk.Under the multiple risks,this cross-industry M&A did not help Baihuacun Co.,Ltd.achieve the expected transformation effect,but made it fall into the more serious financial risk.The main contribution of this paper is in deeply exploring the manifestations and causes of financial risks of listed companies in cross-industry M&A combining with the transformation background.And this paper also provides references for listed companies to prevent financial risks in cross-industry M&A,and enriches the literature of financial risks in cross-industry M&A. |
