Analysis Of The Motivation And Performance Of Tianqi Lithium's Leveraged Acquisition Of Chile's Mining And Chemical Industr

In recent years,enterprises in various links of the lithium industry chain have been affected by the rapid growth of new energy vehicles and energy storage markets,and have shown unprecedented vitality.Lithium mining companies in the upstream of the industrial chain have joined the upstream mining layout,and the number and amount of overseas transactions have repeatedly reached new highs.Therefore,what are the reasons for companies to go overseas for cross-border leveraged mergers and acquisitions,and how leverage will affect the performance of mergers and acquisitions?These issues are the focus of scholars’ attention.Tianqi Lithium Industry is a leading enterprise in the upstream of China’s lithium industry chain,with strong advantages and market position in the production and sales of lithium mines and various lithium compounds.The management is skilled in capital operation and has an inherent gene for aggressive expansion.In 2018,Tianqi Lithium achieved a partial equity acquisition of SQM in Chile with a small amount of its own funds through a syndicated loan.This acquisition marks Tianqi Lithium’s second crossborder merger and acquisition activity,striving to make up for its shortcomings in salt lake brine resources.The motivation for cross-border mergers and acquisitions of SQM by enterprises includes both consolidating the industry’s market leading position and hoping to obtain high-quality lithium resources and advanced lithium extraction technology through mergers and acquisitions to reduce mining costs.This paper uses the event study method to evaluate the short-term transaction performance of Tianqi Lithium in this cross-border M&A case,and obtains the later management performance of the M&A enterprise through the analysis of its financial indicators.Through the above research,this paper draws the following conclusions: Tianqi Lithium’s crossborder M&A has three main motivations.First,Tianqi Lithium aims to consolidate its leading position in the industry;The second is to obtain high-quality lithium ore resources and advanced lithium extraction technology through mergers and acquisitions to achieve the goal of reducing mining costs;Thirdly,the management is skilled in capital operation and has always had a tradition of aggressive expansion.In terms of short-term M&A performance,this M&A event brought positive excess returns to Tianqi Lithium’s stock price during the window period of the event.However,from a long-term performance perspective,Tianqi Lithium’s overall financial performance indicators continue to deteriorate,with significant declines in profitability,operations,debt repayment,and growth.After sorting out,this article concludes that the main reasons why the performance of Tianqi Lithium’s acquisition of SQM did not meet expectations include: there was no objective evaluation of the merger valuation;Merger and acquisition payment methods bring long-term financial pressure;Overconfidence in the management of the acquiring party.Based on the performance of Tianqi Lithium after the merger and acquisition,this article draws the following insights as a reference for subsequent overseas business expansion by companies.Firstly,it is necessary to conduct a reasonable valuation of the target company before the merger occurs,so that the final valuation can truly reflect the future profitability and potential of the target company.Secondly,it is necessary to choose a payment method that is suitable for one’s own situation to prevent any impact on the subsequent normal operation of the enterprise.