Research On Risk Prevention Based On Performance Commitment In M&As

In recent years,the M&A and restructuring market has been very active,and more and more companies have chosen to use performance commitment to complete transactions.Although performance commitments can play a positive role in valuation adjustments,allow the target company to endorse its future profitability,and can send positive signals to the market to help increase the company’s stock price.However,there will be a series of risks because the current performance commitment system in China is not perfect enough,and the principal-agent problem exists inevitably.This article is based on the case of the Shenzhen Liantronics Co.,Ltd.acquired13 companies by performance commitment in the four consecutive years,combined with relevant domestic and foreign literature and theories,using methods such as inductive summarization,qualitative and quantitative combined analysis methods to conduct in-depth research on the risks and preventive measures of performance commitment in M&A.Build a risk analysis system for performance commitment from the three dimensions of core risk,risk performance,and risk incentives to analyze the risks of the Shenzhen Liantronics Co.,Ltd.using performance commitment to complete M&A.It provides suggestions and countermeasures for enterprises to rationally use performance commitment and take precautions against risks.The bright points of this article are reflected in two aspects.Firstly,different from most case that only analysis for a certain M&A event,the article select the Shenzhen Liantronics Co.,Ltd.that have had multiple M&As in a long period of time as the case study object.The conclusion are more convincing in time and quantity.The second is to adopt a more cutting-edge risk analysis system,which is not limited to the study of individual risks,but also considers the superimposed effect between individual risks,and qualitatively and quantitatively analyzes the risks of the Shenzhen Liantronics Co.,Ltd.in the application of performance commitment.But the analysis of this article also has some shortcomings,failing to show that there may be offsetting effects between individual risks.Such as,when judging whether the target company has the risk of financial fraud or surplus reconcilement to accurately complete the performance goals,it may be affected by whether the independent financial adviser has made accurate predictions.Therefore,the interaction between the individual risks of performance commitment needs to be further explored.