Research On Goodwill Impairment Risk Of Asset-light Enterprises Under High Premium Mergers And Acquisitions

Goodwill is the difference between the transaction consideration paid by the acquirer and the fair value of the acquired party’s identifiable net assets in a corporate merger.At the end of 2019,the scale of goodwill in our country’s A-share market was close to 1.26 trillion,and the amount of goodwill impairment exceeded 1300 trillion.Goodwill shows good expectations for future profitability,if it is impaired,it will affect the business performance of the company and has even become a tool for listed companies to carry out profit manipulation and earnings management,harming the interests of investors and affecting the sound operation of the capital market.Especially for light asset companies,a large number of off-balance sheet assets are more likely to lead to high valuations and high premiums in the M&A valuation process,resulting in high goodwill.Once the performance fails to meet expectations,the risk of goodwill impairment is more prominent.Therefore,It has very practical significancet to study the huge amount of goodwill and the risk of goodwill impairment caused by highpremium mergers and acquisitions of light assets companies.Different from the previous practice of high-premium mergers and acquisitions that light asset companies used to experience goodwill impairment after their performance commitments expired,Songcheng Performing Arts realized the acquisition of Six Room at a premium of 6818.24% in 2015,resulting in a goodwill of2.37 billion in 2019,and goodwill was removed by restructuring in 2009,successfully avoiding the risk of impairment of huge amounts of goodwill.Therefore,this article selects Songcheng Performing Arts’ merger and acquisition of Six Room as the research object,and uses the method of case study to analyze the formation mechanism of the huge goodwill of light-asset companies and the devaluation risk factors,and on these basis,through the study of case companies it was found that Songcheng Performing Arts’ high-premium merger and acquisition of Six Room generated huge goodwill mainly due to the following reasons:(1)A large number of off-balance sheet assets of light-asset companies have been confirmed opportunistically during the M&A appraisal process;(2)When the income method is adopted for asset value appraisal,the company maintains a good expectation of future earnings and operating conditions;(3)The complicated equity structure of the acquired party’s six rooms and the consideration payment method based on share-based payment pushed up the transaction price.Subsequent to the impact of national policy changes and intensified industry competition,the acquired party’s operating conditions failed to meet expectations,and goodwill faced impairment risks.Songcheng Performing Arts succeeded in signing performance commitments,actively carrying out mergers and acquisitions integration,and restructuring to remove goodwill and realized the resolution of the risk of goodwill impairment.From the perspective of the effect,the profit of the restructuring and the stock price were realized in the short term,but in the long term,it did not match the company’s "Internet + performing arts" strategy,and long-term equity investment in2020 impairment still occurred,causing serious adverse effects on profits.Finally,in response to the problems of goodwill impairment risk management in the case,this article puts forward reasonable suggestions for asset-light companies to deal with goodwill impairment risks.It is believed that:(1)Asset-light companies should conduct mergers and acquisitions in combination with strategic positioning on the premise of accurate analysis of the country and industry background;(2)It is also necessary to consider the impact of different consideration payment methods on premiums;(3)And at the level of regulators,it is necessary to strengthen the performance supervision and disclosure requirements of asset-light enterprises;(4)It is necessary for our country to further improve the application of the income method in the valuation of asset-light enterprises.This research aims to promote asset-light enterprises under high-premium mergers and acquisitions to better manage the impairment risk of goodwill,maintain and play the value of huge goodwill,and also provide a reference for our country to prevent and resolve major financial risks.