A Research On The Risk Of Leveraged Mergers And Acquisitions

As China’s economic development enters the transition stage,the development of old and new industries is replaced,and the traditional industries have excess capacity,which is in urgent need of transformation.On the other hand,the emerging industries are developing rapidly,and the demand for epitaxial expansion is high.In addition,in recent years,China’s capital market continues to improve,the reform of state-owned enterprises continues to deepen,China’s State Council and CSRC and other relevant institutions also attach great importance to the management of mergers and acquisitions(M&A)activities.Many enterprises follow the good economic and policy situation of the country and the needs of their own development to carry out MERGERS and acquisitions activities,so the transaction scale and the number of transactions in China’s mergers and acquisitions market is rising.In recent years,China’s large m&a cases emerge one after another.Many m&a parties belong to private enterprises,which can choose a single way to raise financing and bear higher risks.In addition to the limitation of their own funds,private enterprises usually choose the way of leverage financing when carrying out high level of M&A,and high level of leverage will further aggravate the risk of m&a.In this context,it is necessary to focus on the analysis of financial risks in leveraged mergers and acquisitions,which can help Chinese enterprises to choose merger and acquisition methods more objectively and prudently and deal with financial risks in mergers and acquisitions.This article chose the Tianqi Lithium Corporation as the research object,because the lithium industry in our country in recent years to carry out mergers and acquisitions activity is more,Tianqi Lithium Corporation as a industry leading,highly leveraged acquisitions SQM is a typical big acquisition case in our country in recent years,this case is representative and typicality,is a worthy of study object.This thesis first analyzes the background of mergers and acquisitions in the industry,and then combs the whole process of mergers and acquisitions,and analyzes in detail the purpose of mergers and acquisitions,financial arrangements and debt structure.Then using the factor analysis method in the process of mergers and acquisitions of four kinds of financial risk in risk assessment,visually see valuations risk,financing risk and payment risk and risk changes before and after the merger integration,integration risk,finance risk and valuation of pricing risk degree of effect on the financial risk of the enterprise after the merger.After that,it makes a detailed risk analysis of four different risks combined with the merger situation,explains the reasons and performance of various risks in the merger,and then summarizes the measures taken by Tianqi Lithium to deal with financial risks after the merger.Combined with the case analysis above,risk control suggestions are put forward for different types of risky mergers and acquisitions,and the final part is the conclusion.After analysis,this thesis believes that Tianqi Lithium once fell into debt default after the M&A,which is the possible result of various risks faced by the enterprise after the highly leveraged merger.According to the result of factor analysis,the impacts of four risks on Tianqi lithium industry crisis from large to small are integration risk,financing risk,valuation and pricing risk and payment risk respectively.The causes and impacts of different kinds of risks are different.In order to better control the valuation and pricing risks in leveraged mergers and acquisitions,enterprises should do due diligence,comprehensively collect information,adopt appropriate valuation methods to evaluate,and constantly improve their own strength in daily operations to enhance their bargaining position.As for the financing risks in M&A,enterprises should actively expand financing channels,combine various financing methods,disperse risks,and strive to optimize the financing structure of enterprises.For the control of payment risk in leveraged mergers and acquisitions,enterprises should choose appropriate payment methods during leveraged mergers and acquisitions transactions,ensure that enterprises have stable cash flow enough to pay future principal and interest,and control the leverage multiple well.In order to better control the integration risks in leveraged mergers and acquisitions,enterprises should make reasonable and scientific integration plans after a comprehensive investigation of the acquirement parties,strengthen the construction of management personnel,and fully consider the impact of mergers and acquisitions on their own operations.