Analysis On The Performance Of Long Yuan Construction’S M&A

Enterprise merger and acquisition has always been one of the effective ways for enterprises achieve the scale expansion,occupy market shares and strengthen the competitive power.However,not all the mergers and acquisitions can bring positive benefits to the enterprises.The number and scale of enterprise mergers and acquisitions in China has been continuously increasing since the 1990 s.The construction industry also stepped into the stage of rapid growth of merger and acquisition.While in recent years,the situation of merger and acquisition in the construction industry is not going so well.The problems in the construction industry in China such as poor development environment,unreasonable resource allocation and the tightening of national policies on land and financing make it more difficult for the development of the construction industry.It plays a significant role in promoting the development of the construction industry to enable construction enterprises to obtain resources such as land and manpower,etc.of the merged enterprises,save costs and occupy market shares through merger and acquisition.For this reason,enterprise merger and acquisition has become the choice of many construction companies.Taking the merger and acquisition of Hangzhou Chengtou Construction Co.Ltd.by Longyuan Construction Group in the construction industry as an example,this thesis aims at studying the motivation and performance of the merger and acquisition in this case.First of all,this thesis summarizes the studies on the motivation and performance of enterprise merger and acquisition at home and abroad.On this basis,it introduces the related concepts and theories of enterprise merger and acquisition and determines the evaluation method that is applicable to the case.Secondly,based on the analysis of the background of merger and acquisition in the construction industry,this thesis introduces the situation of merger and acquisition case of Longyuan Construction Group,and analyzes the motivation and risks of the merger and acquisition.Thirdly,the thesis discusses the performance of merger and acquisition of Longyuan Construction Group.The method of event study is adopted to conduct a short-term performance analysis of Longyuan Construction on the days before and after merger and acquisition.In addition,this thesis analyzes the synergy effect of enterprises from the three perspectives of operation,management and finance with financial index method,and it also conducts a long-term performance analysis of the enterprise merger and acquisition based on economic value added(EVA).At last,this paper draws a conclusion and brings forwards some suggestions.The result shows that,from the perspective of enterprises obtaining short-term performance,enterprise merger and acquisition is beneficial to the increase in the shareholder wealth of Longyuan Construction Group.From the perspective of synergy effect of merger and acquisition,enterprise merger and acquisition only has positive impact on the operating synergy while it has inadequate impact on the management synergy and financial synergy of Longyuan Construction Group.From the perspective of long-term performance,enterprise merger and acquisition has positive impact on the asset profitability of Longyuan Construction Group and can increase the shareholder value.Based on the comparison using economic value added(EVA)method and traditional financial index method,it is found that the net profit of Longyuan Construction Group maintained positive every year,indicating that it achieved paper profit.However,taking the cost of capital into consideration,Longyuan Construction Group suffered losses in the first two years after the merger and acquisition.From the perspective of long-term Performance,M & A has positive effect on the profitability of Longyuan construction assets,and can also improve the shareholder value.Comparing the EVA economic increase method with the traditional financial index method,it is found that the net profit of Longyuan Construction maintains a positive value every year,indicating that the company achieves book profit.But considering the cost of capital,Longyuan Construction suffered a loss two years before the merger.In conclusion,the research on the enterprise merger and acquisition based on a case study in this thesis not only embodies the motivation and performance of the merger and acquisition of Longyuan Construction Group,but also provides reference for the merger and acquisition in the construction industry.Additionally,the economic value added(EVA)method adopted in this thesis is a method used by enterprises as a supplementary for traditional financial index method at present.It can evaluate the performance of enterprise merger and acquisition more comprehensively and it should be promoted in the construction enterprises.