Research On The Risk Of Gambling Agreement In Huayi Brothers Media Group M&A

In China’s capital market,more and more companies are using the betting agreement in their M&A restructuring activities in order to avoid the risks in M&A.However,there are a large number of failures in the application of this popular adjustment tool,with a large number of enterprises failing to complete the expected performance commitments and a large number of risks for enterprises before and after M&A.In today’s world where the new crown epidemic is rampant,it has become more difficult for firms to fulfill their performance commitments during the betting period,and a study of the risks of betting agreements would be beneficial for the advancement of M&A activities.The M&A in the case selected for this paper belongs to horizontal M&A in the film and television industry.This paper selects a typical M&A case of Huayi Brothers’ acquisition of Dongyang Meila,with the aim of conducting an in-depth study of the risks arising from the use of betting agreements in M&A.First,this paper analyzes the motivation of this M&A of Dongyang Meila by Huayi Brothers,and concludes that the main motivation of betting in the M&A of Dongyang Meila by Huayi Brothers is to obtain the human value of Feng Xiaogang,the shareholder of the subject company.Secondly,combined with the changes of market indicators and data before and after the signing of the betting agreement by Huayi Brothers,the paper identifies the risk points of this betting by applying the segmentation identification method around the event time point of the betting agreement,which is divided into three time periods before the betting agreement,during the betting agreement and after the betting agreement.The risk prevention and control strategies for betting agreements are presented in this paper in a segmented time flow.In the period before the betting agreement is signed,the M&A party should conduct prior due diligence on the selected subject company and reasonably determine the appraised value of the subject company.During the period in which the betting agreement is signed,the M&A party should design the betting criteria,payment methods and performance targets flexibly and reasonably to achieve a long-term virtuous cycle for the enterprise.In addition the enterprise needs to expand other financing methods to reduce the enterprise’s financing cost.In the late stage of the betting agreement,enterprises need to prevent a large amount of goodwill impairment by optimizing the agreed terms and reasonably amortizing them afterwards.In addition,M&A parties need to establish a long-term mechanism for incentive monitoring of star resources to force their stars to improve the quality of their works.Through this case study,it can be concluded that enterprises should make reasonable use of the betting agreement for M&A,and carry out risk prevention and control from all aspects before,during and after the betting M&A,and scientifically set up performance targets in order to make enterprises gain more revenue from it and achieve the orderly and healthy development of the industry.