Financial Risk Management Case Study Of Galanz Acquisition Of Whirlpool

Acquisition is not only an important means for enterprises to achieve business growth and scale expansion,but also an important way for enterprises to achieve strategic transformation.However,acquisition is full of risks,especially financial risks.In essence,financial risks are mainly manifested as insufficient cash flow or inability to pay off rigid debts as agreed.Therefore,if the target company’s valuation is improper,especially the valuation is too high,the cash proportion in the acquisition payment is too large,the debt financing scale in the acquisition financing is large,and the acquisition integration is not effective,it is very easy to cause the enterprise’s cash shortage.It can be seen that financial risk runs through the whole process of acquisition: the value evaluation,payment and financing of the target enterprise during acquisition,and the financial integration of the enterprise after acquisition.This paper adopts the research method of case analysis to study the case of Galanz’s acquisition of Whirlpool.Based on the analysis of the acquisition background and the selection of target enterprises before Galanz’s acquisition,this paper focuses on the analysis of Whirlpool’s value evaluation,acquisition payment,financing arrangements,and the risks faced by the financial integration after the acquisition,as well as how Galanz successfully completed the acquisition by managing risks through reasonable and effective means.This study finds that,first,Whirlpool has not performed well in domestic business in recent years,and the acquisition needs to bear the valuation risk arising from the deviation between its brand value and business performance;Second,the acquisition enterprise’s own financial strength is insufficient,and the acquisition funds can only be solved through internal financing in the form of self raised funds by shareholders;Third,because all the funds for this acquisition are paid in cash,which has had a huge impact on the capital chain of Galanz,resulting in corresponding payment risks;Fourth,Galanz is a traditional family enterprise in China and Whirlpool is an overseas brand.There are differences in their business philosophy and management style,and financial integration risks are likely to occur after the acquisition is completed.These risks constitute all the financial risks of Galanz’s acquisition of Whirlpool.Once the management of a certain link is out of control,the acquisition will fail.However,Galanz took various measures to avoid and control financial risks,such as supervision of border offer price and financial consistency integration,and finally successfully completed the acquisition.On the basis of case analysis,this paper gets the following enlightenment: due diligence and prudent valuation should be carried out on the operating performance and value of the target company;The capital structure of the merging companies should be adjusted to a reasonable level to reduce the pressure on debt repayment and reduce the risk of rigid cashing;Raise funds through diversified ways to reduce financing risks reasonably;Acquiring enterprises need to predict the possible situation after the acquisition of the target company and make a strong integration.Only in this way can the acquisition be successfully transacted and the post acquisition integration be completed.