Research On The Impacts Of Valuation Adjustment Mechanism In Strategic Investments

With the rapid development of the economy and the process of globalization,market competition has also become more intense.In order to establish and maintain a competitive advantage,more and more companies choose to make strategic investments to achieve their strategic goals and achieve a dominant position in the industry.Like financial investors,strategic investors also often use VAMs to avoid the risk of information asymmetry.VAMs also have certain incentive effects on investees,thus improving investment efficiency and reducing investment risks.But in real capital market,there are very few examples of successful win-win situations,while many investees suffer huge losses due to failed gambling.On the other hand,based on investors’ absolute strong positions and mastery of the initiative in formulating agreements,it’s believed that investors can ensure that they won’t lose money ever by making agreements in their own favor.Nevertheless,in the case of H.BROTHERS’s acquisition of Meila Media,Meila,which failed in this betting,fell back,while the acquirer H.BROTHERS suffered severe losses.Therefore,this paper starts the study with this case.This article discusses the motivation of using the VAM in this case,analyzes the impact of the VAM on H.BROTHERS,then summarizes the defects of this VAM and its application,and thus makes suggestions for strategic investors to formulate the content and use of VAM.Based on the analysis of this case,this paper draws the following suggestions:(1)When formulating the betting agreement,the assessment of firm’s value should be as scientific and reasonable as possible;(2)VAM’s standards should take into account flexibility;(3)The performance commitment targets should be moderately difficult;(4)The terms of VAM agreement should be relevant to the actual situation;(5)Even during the gambling period,the status of the investee enterprise should be kept in view.