A Study On The Motives Of High Premium Mergers And Acquisitions In Cultural And Media Industry

Since 2011,various preferential policies have emerged in the culture and media industry.At the same time,in order to comprehensively promote the market-oriented reform of mergers and acquisitions,the government implemented a series of convenient measures for mergers and acquisitions.Since then,many enterprises began to carry out mergers and acquisitions insanely,among which culture and media enterprises accounted for the majority.On the other hand,mergers and acquisitions in the culture and media industry showed the characteristics of high valuation and high performance commitment.Meanwhile,the high valuation and high premium also bring a huge amount of goodwill confirmation.By the end of 2016,the total goodwill of listed companies has exceeded trillions yuan.At present,the performance commitment period for mergers and acquisitions has been completed in batches.According to Wind data,there are 884 listed companies with goodwill impairment losses in 2018,with a total impairment amount of 166.805 billion yuan,a year-on-year increase of 354.46%.Goodwill impairment reached a record,and the lagging influence of M&A premium on enterprises was manifested.In order to accurately understand the present status of the culture and media enterprise high premium M&A in China more,put forward the effective measures which can be used for reference of concrete,this paper selects a typical case to analyze and put forward some effective measures to apply to the whole industry,avoid unreasonable high premium for cultural media companies and achieve long-term stable operation.The year of 2013 is known as the "first year of mergers and acquisitions" for culture and media enterprises.High valuation and high premium in mergers and acquisitions are common in the culture and media industry,which has also laid a curse when the merger and acquisition market is booming.In 2018,large impairment of goodwill occurred in the culture and media industry,which was closely related to premium M&A.From the current results,the share price of M&A enterprises fell back to the original point after a short rise,the expected synergies were not fully realized,but it caused difficulties in future development.The calculation and withdrawal of huge impairment of goodwill showed that such a high premium was unreasonable.Combined with the background of mergers and acquisitions in that year,this paper analyzes the causes of high premium.Firstly,the encouragement from macro policies and the corporate property of asset-light led many culture and media enterprises to join the merger wave of high premium.Secondly,due to the lack of experience in asset-light mergers and acquisitions and benchmarking enterprises,the income approach was adopted for valuation,resulting in a high premium.Thirdly,the management are overconfident that M&A can achieve the ideal system effect,and accepted a high premium.Finally,the signing of the performance compensation agreement gives the management psychological hints and reduces the risk awareness.Through the case study,this paper concludes that the high premium control management in China's culture and media industry is necessary to prevent the financial risk of enterprises and be feasible in policy and operation.Therefore,some suggestions can be considered in controlling the premium level: firstly,accurately grasp the strategic positioning of enterprises,and make clear whether the high premium generated by mergers and acquisitions matches the organizational strategy;The second method is to accurately analyze the macro environment,pay close attention to the political dynamics,make use of the advantages and avoid the disadvantages,and have a clear understanding of the industry in which the merging enterprises are located.Thirdly,the enterprises should carefully select the assessment institution,carefully determine the main parameters of the assessment and do due diligence.Fourthly,reasonable consideration of synergies needs to be made from the perspectives of management,operation and finance.In addition,attention should be paid to the integration of resources and the docking of cultures after the completion of mergers and acquisitions.Fifthly,the performance compensation commitment need to be paid attention to.According to the characteristics of the M&A industry,the performance compensation model need to be set.Finally,according to the problem of goodwill impairment caused by high premium in recent years,the paper puts forward policy suggestions to the market regulators to prevent and control high premium before,during and after M&A transactions.