A Study On The Performance Commitment Risk And Prevention Of Beautiful Ecological Merger And Acquisition Of Bada Garden

In recent years,there are numerous cases of mergers and acquisitions in China's capital market,mainly due to the increasingly fierce competition faced by enterprises,the reorganization of mergers and acquisitions is to seek new ways for enterprises to develop.Through the operation of capital,Merger and acquisition enterprises hope to achieve a series of goals,such as enterprise expansion,industrial chain upgrading,and stepping into emerging industries.However,due to the information asymmetry between the two sides of the merger and acquisition,there may be deviation in the value evaluation of the acquired party,which will not only lead to the failure to achieve the expected goal after the merger and reorganization,but also damage the interests of listed companies and fail to achieve the purpose of protecting the small and medium shareholders.Therefore,in order to protect the interests of small and medium investors,performance commitment is widely used in Merger and acquisition enterprises.But in practice,performance commitment also brings a series of problems.For example,high performance commitment often means high valuation and high premium,which will generate huge goodwill.In the future,once goodwill is withdrawn for impairment,it will damage the profits of the enterprise;the management of the subject enterprise is prone to short-term behavior to complete the performance commitment,and the target enterprise management can accomplish the objectives by means of financial fraud and earnings management;the performance commitment cannot be completed,the share price of the acquirer is reduced,and the commitment party has no ability to compensate on time.According to the statistics of the completion rate of performance commitments in recent years,it is found that the completion rate of performance commitment has decreased from 86% in 2014 to 60% in 2019,the unfinished performance commitment not only requires high compensation,but also the operation of both sides of Merger and acquisition enterprises will be seriously affected,and even will affect the development of China's capital market.Therefore,it is necessary to study the risk and prevention of performance commitment,identify the risk of performance commitment and improve the performance commitment mechanism.This paper adopts the methods of literature research and case analysis,based on the theory of information asymmetry,fraud and risk identification management.Take the first case in the country,which is applicable to the case of group securities infringement disputes,which is applicable to the mechanism of “supporting litigation plus pre litigation adjustment and demonstration cases”,taking the 100% equity interest of the Ba Da Yuan Lin and acquisition of Mei Li Sheng Tai as an example,the risk identification and prevention of performance commitment are studied.Firstly,this paper summarizes the literature on performance commitment and risk at home and abroad;Secondly,this paper introduces the case of the acquisition of Ba Da Yuan Lin by Mei Li Sheng Tai,identifies the risks brought by the application of performance commitment to Mei Li Sheng Tai and analyzes the causes of the risks.Among them,the risk before signing performance commitment is mainly the target value risk of performance commitment and the risk of performance compensation.The risk during the implementation period of performance commitment is mainly the risk of financial fraud and litigation.The risk after the expiration or failure of performance commitment is mainly the risk of litigation and goodwill impairment.Finally,this paper proposes that listed companies should pay attention to the early due diligence,hire intermediary agencies to review the target value of performance commitment,formulate multiple compensation methods,improve internal control of the company,management should take the subject enterprise carefully and strengthen comprehensive supervision,so as to provide some reference and consideration for listed companies to avoid risks when using performance commitment.