Research On The Cross-Industry High Premium M&A Driven By The New Energy Vehicle Industrial Policy

Industrial policy is the centralized embodiment of national development strategy.Under the guidance of the government,industrial policies influence the allocation of resources among industries through credit facilities,tax incentives,government subsidies and other preferential measures,in order to achieve the purpose of guiding and accelerating industrial adjustment and promoting the transformation and upgrading of key industries.It has been more than 40 years since the reform and opening up.The "tangible hand" of industrial policy has always exerted a profound influence on the industrial structure and economic development of our country,and at present,this influence will continue in the future.Especially since the supply-side structural reform policies were introduced in November 2015,the debate on industrial policies has become a hot spot.With the increasing consumption of petroleum resources and increasing attention to environmental protection,the traditional automobile industry,which is a pillar of our economy,is facing more and more severe pressure,and the concept of new energy vehicle has emerged.In 2009,the Ministry of Science and Technology and the Ministry of Finance jointly issued the "Notice on Carrying out Pilot Work of Demonstration and Promotion of Energy Saving and New Energy Vehicles".Under the guidance of industrial policies,the technology and industrial supporting facilities of new energy vehicles gradually become mature and perfect,and China has become a major country in the production and marketing of new energy vehicles.In the face of such selective industrial policies with exclusive nature,and accompanied by the "loosening" of merger and reorganization policies,the number and scale of mergers and acquisitions in China’s new energy automobile industry have begun to increase,and the government is inclined to give generous resources to the enterprises that join the new energy automobile industry.However,the surging phenomenon of blindly following hot industries and the herd effect,"sky-high mergers and acquisitions" and "huge goodwill" emerge one after another,which distort the value of listed companies and damage the interests of investors.How does industrial policy affect the merger premium? Is the performance of high-premium cross-industry M&A driven by industrial policies good or bad? All these questions deserve further investigation.Based on the perspective of industrial policy,this paper studies the M&A premium decision made by listed companies when they acquire target enterprises supported by industrial policies.On the basis of sorting out the influencing factors and economic consequences of premium mergers and acquisitions,as well as the impact of industrial policies on micro enterprise behavior and other relevant literatures,this paper further integrates the theoretical basis of industrial policies and premium mergers and acquisitions,and analyzes the path of premium mergers and acquisitions driven by industrial policies and their performance.This paper attempts to explain the enterprise performance of premium M&A driven by industrial policies as follows: Under the macro background of increasing economic uncertainty index year by year,target enterprises supported by industrial policies undoubtedly have more stable prospects,which drives the main merger party--especially the main merger party that is still in urgent need of merger under the background of high economic uncertainty--to irrationally raise the expected earnings of merger and acquisition and pay a high premium.The phenomenon of underestimating risks and overestimating investment returns magnifies the herding effect,leading to a large amount of capital entering the market,oversupply and excess capacity in the whole market.In addition,the positive feedback from the short-term market after the high-premium merger further intensifies the cognitive bias of managers’ self-confidence.Managers take advantage of the "paternalism" resource tilt projected by the government to them,and take aggressive debt and expansion in investment,financing and operation.Under the action of two phases,the enterprise finally gets into financial trouble when the tide goes out.As for the case,this paper chooses Jianrui Fire Protection(stock code: 300116)as the research object of the cross-industry merger and acquisition of Waterma,which is a typical case of "snake swallowing elephant" high premium merger and acquisition for the pursuit of strategic transformation.After the introduction of the case,the paper combs the path of industrial policy-driven premium M&A from four aspects,including the characteristics of the main side,government subsidies,tax incentives and investor optimism.In the analysis of M&A performance,the event study method is adopted to analyze and reflect the short-term and long-term performance of the enterprise by financial indicators,and to sort out the operation performance of the enterprise and the phenomenon of major shareholders reducing their holdings and cashing out.The results show that high premium M&A brings excess returns to shareholders in the short term,but the long-term performance is very weak,with the index declining year by year,far lower than the average level of the industry,and fails to bring about synergistic effect to improve efficiency.After the ebb of government subsidies,the case company fell into the business and financial difficulties of overcapacity,debt default and capital chain break.And the major shareholder intends to carry on the surplus operation,delaying the information disclosure measures,and further damages the rights and interests of small and medium shareholders.