A Study On The Financial Risk Of High Premium M&A And Its Prevention

With the development of market economy,more and more enterprises choose to carry out industrial integration through acquisition and merger,so as to expand production,integrate industrial chain,seize market share,realize strategic transformation and other business purposes.With the increase of the number of M & A transactions,M & A characterized by high premium has gradually become the norm in market M & A,but the financial risks of M & A with high premium are often ignored when enterprises pursue interests.After the completion of M & A,these risks are gradually exposed,which brings heavy financial burden to enterprises.High premium M & A is often accompanied by high performance commitment.Once the M & a party fails to fulfill the commitment in the future,the M & a party will face the risk of goodwill impairment,capital recovery and so on.According to the survey,the failure rate of high premium M & A in China is increasing year by year,and the failure of M & A will seriously damage the interests of both parties,so it is particularly important to identify and prevent the financial risk of high premium M & A.On the basis of reading a large number of domestic and foreign related literature,based on information asymmetry theory,self assumption theory,synergy theory,and comprehensive risk management theory,this paper selects the case of Huanghe whirlwind’s acquisition of Shanghai Mingjiang for research.This paper first introduces the basic situation of the two sides of M & A and the event of M & A,then compares the premium level of this transaction with the average premium level of the same industry to explain the high premium behavior of the M & A,and analyzes the reasons for the high premium from the three perspectives of the overvalued value of the target assets,the late synergy effect and the good trend of the stock price.Then,HHM method is used to identify the financial risks in the high premium M & A of the Huanghe whirlwind,and the financial risks in each stage of M & A of the Huanghe whirlwind are analyzed in detail.It is believed that the financial risks are mainly reflected in the target enterprise valuation risk before the high premium M & A,the financing and payment risk in the high premium M & A,the financial integration risk after the high premium M & A,the performance compensation commitment implementation risk and The financial risk of the Huanghe whirlwind is evaluated quantitatively by F-score model.Finally,according to the financial risks in this case,the paper puts forward the measures to prevent therelevant financial risks in the high premium M & A,and holds that the enterprise should carry out sufficient due diligence and reasonably evaluate the value of the target enterprise before the M & A;in the M & A,it should actively improve the way of fund raising,scientifically design payment methods and improve the design of performance commitment agreement;after the M & A,it should pay attention to the financial integration;for Government departments should strengthen supervision and improve the quality of M & A.Through the above analysis,this paper draws the following conclusions and Enlightenment: the Huanghe whirlwind acquired Shanghai Mingjiang at a premium rate of 20 times.However,it failed to prevent and control the financial risks at all stages,which ultimately led to the failure of M & A and seriously affected the operating status and reputation of listed companies.The prevention of financial risks in M & A activities should run through the whole process of M & A,and should be clear about the establishment of a reasonable transaction consideration,controlling the premium rate is the core factor to effectively avoid the financial risk of high premium M & A.