Research On The Motivation And Market Reaction Of Wingtech's Acquisition Of Nexperia

As the core of the information technology industry,the semiconductor industry plays a strong role in promoting economic and social development in China.In recent years,with the increasingly concentrated and fierce competition in the industry,the expansion through mergers and acquisitions has become an important method for semiconductor companies to accelerate their growth.However,there are still very few studies on the motivation and performance evaluation of mergers and acquisitions in the semiconductor industry in academia,and it is still difficult for the research findings to provide sufficient theoretical support for practice.Therefore,this paper takes Wingtech Technology's acquisition of Nexperia B.V.,the largest merger and acquisition case in the semiconductor industry so far,as the research object,and conducts an in-depth research of the case from the dimension of motivation and effect,in order to offer a certain reference value for future mergers and acquisitions in China's semiconductor industry.This paper first analyzes the motivation of the M?A event from both parties of the merger,and then studies the effect of the event based on the identification of the merger motivation,and finally draws the conclusions and implications based on the analysis results.From the view of industry and company,this paper explores the motivations of Wingtech's acquisition of Nexperia from the three dimensions of the traditional business,the new business and the expected synergies between the two parties.The industry part focuses on analyzing the industry growth trend,room to growth,competition landscape and industrial chain position,etc.The company part focuses on analyzing the company performance,profitability,industry status,etc.In terms of M?A effect analysis,based on the analysis result of M?A motivation,this part mainly studies the performance of Wingtech's M?A of Nexperia from the three dimensions of market reaction,financial effect and non-financial effect.In the part of market reaction,this paper uses the event study method to examine the short-term performance of this case,and the stock price trend during the entire merger period is used to explore the long-term impact of the M?A event.In the part of financial effect,this paper focuses on the analysis of Wingtech's profitability and solvency.In the part of non-financial effect,this paper mainly studies from management strategy,human resources,technology research and development,and capital use.This paper mainly draws the following three conclusions.First,the M?A of Nexperia is the way that Wingtech chose to break the status quo when it was caught in the dilemma.The growth space of mobile phone ODM industry is limited and the profitability is low.Wingtech,the industry leader,has fallen into the bottleneck of performance growth.The semiconductor industry located in the upstream of Wingtech's industrial chain,as a high-potential industry,is fully attractive to Wingtech.Through the acquisition of Nexperia,a high-quality asset with high growth and strong profitability,Wingtech is expected to grasp the development opportunities in the semiconductor industry,obtain a new source of profit,and finally realize the long-term goal of extending the industrial chain,enhancing profitability,obtaining synergies,and improving the value of the company.Second,the acquisition of Nexperia had a significant positive impact on Wingtech's stock price.In terms of short-term market reaction,the result of event study method shows that the abnormal return of Wingtech in the event window[-15,15] is mostly positive.The cumulative abnormal returns in the event window[-15,15],[-10,10] and [-3,3] are all significantly greater than 0,indicating that the merger significantly improved the short-term market performance of Wingtech.In terms of long-term stock price trend,with the industry recovery and the promotion of the M?A process,the trend of Wingtech's stock price is similar to that of the semiconductor index,and the Wingtech's stock price shows an obvious growth trend.It can be seen that the merger had indeed made the market value of Wingtech soar.Third,the acquisition of Nexperia helped Wingtech to achieve the acquisition target of scale expansion and profitability improvement,but at the same time,it also brought great financial risk to Wingtech.In terms of profitability,due to the small scale of incorporation in 2019,Nexperia had a limited effect on Wingtech's performance.In 2020,the proportion of semiconductor business revenue increased,and Nexperia had a more significant effect on Wingtech's overall profitability.In terms of debt solvency,the M?A event greatly increased the debt repaying pressure of Wingtech from 2018 to 2019.Although its solvency improved with the debt repayment in 2020,the current debt repayment pressure due to the M?A event and the financial pressure for subsequent integration are still relatively large.In addition,this paper obtains the following two implications.First,for enterprises expecting to enter the semiconductor industry through M?A,careful evaluation of their situation and industry condition,a clear future strategic development direction,clear and sufficient motivations for M?A,and selection of suitable targets are prerequisites for successful M?A.Second,financial risk control should run through the semiconductor industry merger and acquisition.