Research On Motivation And Performance Of Overseas Mergers And Acquisitions Of Midea Group

With the industrial upgrading revolution in the new era,the scale of China’s home appliance enterprises has been growing,and many of them have turned their attention to overseas markets,launching a new wave of overseas mergers and acquisitions.This paper first explains the current status of research on sequential M&A at home and abroad,clarifies the motivation of sequential M&A and the performance evaluation methods of sequential M&A.The paper then introduces the background and development trend of the home appliance industry,Midea Group and the acquired parties and the overview of M&A.It also analyses the motivation of Midea Group’s successive overseas M&A,and then uses the event study method,the financial index method and the economic value added method to analyse the performance of Midea Group’s successive overseas M&A.Analysis by the event study method showed that the successive overseas M&A activities did bring positive short-term wealth effects to the company.The results of the financial indicators analysis show that the profitability indicators of Midea Group have declined due to the impact of successive M&As,but in the long run,the profitability of Midea Group has been improved;the solvency of Midea Group has declined after the M&As,and has gradually increased with the completion of the M&As;the operating capacity has generally improved;the growth capacity,the operating income and net profit of Midea Group have increased after successive overseas M&As.In terms of growth capability,Midea’s operating income and net profit have been increasing after successive overseas M&As,with revenue growth at the beginning of the M&As reaching a record high but falling sharply after the completion of the M&As,while net profit growth has been flat.Analysis of economic value added shows that Midea’s economic value added has remained positive,indicating that the company has been creating positive value.However,from the year in which the successive acquisitions were completed,i.e.2017,Midea’s EVA growth rate began to decline and continued to decline in 2018,with a similar decline in EVA payout,indicating that the successive acquisitions had a negative impact on the company’s long-term performance.The above analysis concludes with a summary of recommendations and insights.Recommendations are made to Midea: expand its own sources of funding: appropriately increase the proportion of endogenous financing : and improve the company’s technological innovation capabilities.It also provides reference advice to other enterprises in the home appliance industry:when selecting M&A targets for overseas M&A,enterprises should be guided by their overall development strategy and should focus on post-merger synergy management.