Research On Motivation And Performance Of Cross-Industry And Continuous Mergers And Acquisitions Of Traditional Industries

Since 2013,the situation of the economic downturn in the Chinese economy continues to aggravate,and the “new normal of economy” appears.The current development of Chinese traditional industries gradually exposes problems such as overcapacity,high costs,and weakened competitiveness.Faced with the pressure of continuous decline in business,more and more traditional industries begin to transform their business.They utilize the advantages of accumulated cash flow to carry out mergers and acquisitions(M&A)and then turn to the emerging economic industries encouraged by the country.Under this circumstance,cross-industry and continuous M&A has become a new trend in Chinese M&A.With the continuous development of Chinese industrialization and urbanization,the problems of environmental protection are becoming increasingly serious at the same time.Environmental pollution has become one of the major realistic problems that impact the sustainable development of the Chinese economy and society.The Party Central Committee and the State Council attach great importance to Chinese environmental protection and continuously strengthen environmental governance.In 2010,environmental protection was included in Chinese strategic emerging industries.In 2013,the State Council regarded the industry of environmental protection as a new pillar industry of the national economy.In 2015,new environmental law,the strictest one in history,was launched,followed by a series of policies and regulations.China’s emphasis on the environmental industry has reached an unprecedented degree,and the environmental industry has ushered in a broad space for development.With the opportunities under the rapid development of the environmental industry,many traditional enterprises begin to project the environmental industry through cross-industry M&A to break through the limitations of traditional industries and search for new profits.Nevertheless,due to the difference in operation and management among industries,there exists a high failure rate of cross-industry M&A,low feasibility of continuous M&A,and serious discomfort after entering new industries.Therefore,the topic of how continuous cross-industry M&A can bring continuous positive effects to enterprises is worthy of in-depth study.Based on this background,this paper chooses the Yingfeng environment as the case study object to conduct the research.Yingfeng environment once was a traditional manufacturing enterprise.From 2015 to 2018,through continuous cross-industry M&A,it not only successfully transformed its business from the equipment manufacturing industry to the environmental industry,but also built a highly competitive layout of the whole industrial chain in a relatively short time.Yingfeng environment is a typical example of the transformation of traditional enterprises as well as the improvement of the industrial chain’s layout for stock enterprises.Firstly,this paper introduces the cross-industry continuous M&A process of the Yingfeng environment in detail and analyzes its preparations before M&A,the strategies for selecting M&A targets,the features of M&A plan’s designs,and the business integration measures after M&A.This paper tries to find some experience from Yingfeng environment’s continuous cross-industry M&A.Secondly,through studying the motivations of Yingfeng environment’s cross-industry continuous M&A,this paper summarizes four reasons for its success: 1)Break through the limitations of traditional industries;2)Seize the opportunities under the development of the environmental industry;3)Promote the development of M&A;4)Improve the layout of industrial chain;5)Achieve the synergy.Thirdly,this paper evaluates the long-term and short-term performance of Yingfeng environment’s M&A through the methods of event study and financial indicators.Before analyzing the short-term performance,this paper compares all traditional enterprises that have entered the environmental industry through continuous cross-industry M&A and analyzes the relative performance of these enterprises.Similarly,before analyzing the long-term performance,this paper adopts the factor analysis to conduct the horizontal comparison and analysis within the equipment manufacturing industry and environmental industry which Yingfeng environment has been involved in,and thus determines the change,stability,and continuity of Yingfeng environment’s performance of in the process of continuous cross-industry M&A.Through a series of analyses,this paper draws the following conclusions: 1)Yingfeng environment has achieved the strategic goal of industrial transformation and upgrading through continuous cross-industry M&A;2)Yingfeng environment has built a highly competitive layout of environmental industry;3)Yingfeng environment has improved its short-term performance;4)Yingfeng environment has increased its long-term performance.Finally,based on the experience and lessons of Yingfeng environment’s continuous cross-industry M&A,for stock enterprises that want to improve their layouts of the industrial chain through M&A,this paper proposes suggestions on preparations before M&A,the strategies for selecting M&A targets,the business integration after M&A and so on.