The Motivation And Effect Analysis Of Using VAM In The Merger And Acquisition Of New Classic Media By China Literature Group

In recent years,in China's capital market,more and more listed companies have carried out M ? A in order to seek their own development,but due to the information asymmetry between the two sides of the transaction,resulting in frequent cases of high premium M ? A,which not only cannot make the M ? A transaction play a synergistic role and help companies grow,but also easily lead to the failure of M ? A,and thus have a negative effect on both sides of the transaction.In such cases,Valuation Adjustment Mechanism are created to reduce M?A risk and protect the interests of the parties.However the application of VAM has two sides,The scientific and reasonable application of VAM may lead to a win-win situation for both parties.However,too high performance commitment or unreasonable assessment indicators in the VAM will lead to the failure of VAM,this will bring the pressure of performance compensation to the financier and the pressure of stock price decline to the investor.Based on this,this paper analyzes cases of listed companies applying VAM in M?A transactions,hoping to provide reference for domestic listed companies applying VAM in M ? A activities in the future.This paper firstly combs the literature on M?A and VAM at home and abroad and conducts an in-depth study of the theoretical concepts related to them,then takes the case of the application of VAM in the acquisition of the New Classic Media by the China Literature Group as the object of study,and uses a combination of theory and practice to analyze the motivations and effects of the application of VAM by both parties in the M?A activities.The specific steps are as follows: the first step,the basic information of the two parties,the transaction process and plan,the motivation of the M?A and the application of VAM;the second step,the analysis of the motivation of the application of VAM by China Literature Group and New Classic Media;the third step,the analysis of the effect of the application of VAM by China Literature Group,firstly,the financial analysis method is used to analyze whether the VAM can generate synergistic effects,and secondly,the event research method is used to analyze the response of the secondary market to the event,and finally analyzing the large goodwill impairment provision made by the China Literature Group as a result of New Classic Media not completing the betting performance for two consecutive years.Through the above analysis,this paper concludes that:(1)both sides of the transaction sign the VAM based on their own interests;(2)unreasonable VAM do not bring synergies to the M?A parties;(3)excessive performance promises do not stimulate the market,and the market pays more attention to the achievement of gambling performance;(4)the huge amount of goodwill generated by high premium M?A will pose hidden dangers to the future development of the enterprise.Based on this,the following recommendations were made:(1)the valuation of target enterprises should be reasonably determined;(2)the betting performance should be set scientifically;(3)the betting indicators and binding clauses should be increased;and(4)the M?A parties should strengthen the supervision of the acquired parties.