Leo Group Co.,Ltd’s Goodwill Impairment For High-premium Mergers And Acquisitions And Its Risk Prevention Research

In recent years,the M&A market in China has become more and more active,and the transaction amount and quantity are increasing.Under the background of the development of Internet technology and the acceleration of Chinese economic structure transformation,light asset enterprises have become the best choice for listed companies to optimize resource allocation and seek business transformation because of their high operational flexibility,fast value-added speed and less capital occupation,which makes listed companies willing to pay super high premium to implement M&A,which leads to huge accumulation of goodwill in capital market.The danger is imminent.In order to prevent the risk of huge goodwill impairment caused by high premium M&A,many enterprises usually introduce gambling agreements in M&A transactions.However,by combing the relevant literature,it can be found that the success rate of gambling agreement in China is less than 40%.Once the gambling fails,listed companies will face the risk of huge goodwill impairment,which threatens the sustainable and development of the company.Therefore,combined with the latest trend of M&A market,tracking the M&A wave of light assets enterprises in Chinese capital market starting from the high premium caused by overvaluation.At the same time,using the real option theory and Black-Scholes option pricing valuation model,this paper studies the effectiveness of using bet agreement to prevent goodwill impairment risk in M&A activities.Through the case of Leo Group Co.,Ltd’s high premium merger and acquisition of asset light enterprise Zhiqu Advertising,the research finds that:(1)The result of B-S Option pricing model is closer to the real value of the enterprise,which can effectively prevent the goodwill impairment risk caused by high premium M&A.(2)Huge goodwill impairment will aggravate the financial risk of the company,and further lead to the systemic risk of the company.(3)The gambling agreement does not play an effective role in preventing the goodwill impairment risk of M&A party.Finally,from the internal and external perspectives,this paper puts forward countermeasures and suggestions for preventing goodwill impairment risk in high premium M&A,and provides some reference for similar M&A activities in Chinese capital market.There are 30 figures and 20 tables as well as 82 references in the paper.