Research On Risk Control Of Corporate M&A Based On Adjustment Mechanism

With the accelerating pace of global economic development,competition among enterprises is becoming increasingly fierce,and mergers and acquisitions are a major means for enterprises to expand,capture markets and achieve rapid growth.In China’s capital market,mergers and acquisitions are becoming more and more frequent due to the rapid development of the market.However,the high premiums during the M&A process and the less-than-expected post-merger performance have become a common problem.In order to increase the success rate of M&A,companies have started to use the tool of a betting agreement.This agreement incorporates matters such as deal conditions and commitments agreed upon by both parties into the contract,binding the parties to act in the future in order to reduce investment risk while improving the outcome of the M&A.In this way,even if the M&A party finds in the future that the commitments made by the acquired party fail to meet expectations,it can still be held accountable within the limits set in the agreement,ensuring the interests of both parties to the M&A.As a result,betting agreements are increasingly used in the M&A process.The new 2016 version of the Measures for the Administration of Major Assets Reorganization of Listed Companies mentions that "listed companies should follow market-based principles when planning transaction activities and decide on their own whether to choose performance compensation as well as earnings per share filling initiatives," which means that the government is interested in corporate This means that the government has a positive attitude towards the use of betting agreements in mergers and acquisitions.The main purpose of the betting agreement is to address the information asymmetry in the M&A process and to reduce the risks associated with high premiums.However,in actual mergers and acquisitions,in order to reduce their own risks,M&A parties tend to overweight the betting agreements,resulting in excessive transaction premiums.This problem mainly stems from the fact that M&A parties over-rely on the betting agreement when assessing the value of the subject company and fail to fully consider the impact of other factors on the value of the company.In addition,the betting agreement itself carries certain risks for corporate M&A,such as the agreement may lead to deal failure when the parties cannot reach an agreement.Therefore,in actual M&A,the betting agreement should be used as an auxiliary tool rather than relying solely on the betting agreement to determine the acquisition price of the subject company.Only on the basis of a comprehensive assessment of the value of the subject company and the reasonable use of the betting agreement can the risk of M&A be more effectively reduced and the success rate of M&A be improved.In this paper,we find that there are few studies on the risk of M&A under the betting agreement,so we choose the risk of M&A based on the betting agreement as the research content.The case study of CJE’s M&A of Jintai Lai is selected to provide an overview of the M&A parties and the M&A transaction process,and a brief overview of the content and implementation of the betting agreement signed by the M&A.The risks that may arise from three perspectives: ex ante,ex post and ex post,are identified as follows: ex ante information asymmetry risk,national policy risk,betting clause design risk,ex post valuation risk,stock price fluctuation risk,financial risk,ex post performance commitment risk and goodwill impairment risk.Based on the identified risks,we established a risk assessment model for M&A based on the betting agreement and assessed the M&A risks of CJEE,used hierarchical analysis to analyze each risk to get the weight,and then used fuzzy comprehensive evaluation method to quantify each risk.The study found that there are significant risks in this M&A based on the betting agreement,among which information asymmetry risk,valuation risk and goodwill impairment risk are of high importance and need to be focused on prevention.Based on the above analysis,we propose the following risk control recommendations: conduct detailed due diligence beforehand to fully understand the subject company,pay close attention to policy changes,set reasonable betting terms for repeated gaming,reasonably evaluate enterprise value during the process to prevent blind optimism,fully disclose the M&A situation in a timely manner to avoid information errors,establish a financial early warning mechanism,set reasonable performance commitment standards afterwards to prevent high This article is based on the perspective of M&A parties.This paper identifies the M&A risks based on the betting agreement from the perspective of the M&A party,and proposes specific measures for risk control for M&A companies to improve the effectiveness of the use of betting agreements,to provide ideas for identifying and controlling the M&A risks of enterprises based on betting agreements,to broaden the scope of theoretical research on betting agreements,and to enrich the research on M&A risk control.It provides some reference and reference for other enterprises that want to enter into pari-mutuel agreements in the process of M&A...