A Case Study On The Risk Control Of Performance Commitments In The Acquisition Of Dongyang Meira By Huayi Brothers

Economic development over the past few years,mergers and acquisitions are becoming more common.Due to data asymmetry and other reasons,merger carries significant risks.especially in the media and film industries.High-risk mergers and acquisitions have become a common phenomenon.To protect the interests of both parties in mergers and acquisitions,more and more companies have implemented performance contracts as a means of hedging in M&A,but commitment to performance is a double-edged sword.Abuse poses a number of risks that will adversely affect the development of the Sector.This thesis selects a case of mergers and acquisitions by Huayi Brothers from Dongyang Meira,which has signed an operational commitment to examine the situation from a risk control perspective and train other companies.risks when using Performance commitments on how to control risks.The thesis adopts a case study method to conduct a case study on the risk control situation of Huayi Brothers’ merger and acquisition of Dongyang Meira’s performance commitments.Firstly,it sorts out performance commitments and related theoretical literature,analyzes the role of performance commitments in mergers and acquisitions,and explores the causes of their risks.The risks of performance commitments are divided into three stages,including:(1)Prior to signing the performance commitment: selection of the target company and valuation risk.(2)During the signing of performance commitments: the risk of payment method selection and performance standards,performance compensation,and the risks established.(3)After the performance commitment is signed: stock price fall risk,debt repayment risk,goodwill impairment risk,etc.Comparing it with the case of Huace Film and Television’s merger and acquisition of Keton Media’s risk control,it can better illustrate its existing risk points,and conclude that Huayi Brothers did not control its performance commitment risk well,which led to the decline in stock price.The economic consequences of debt repayment difficulties and impairment of goodwill.Based on the above analysis,the following five points of enlightenment are derived:(1)Blindly signing a performance commitment agreement may be counterproductive.(2)Choosing the right M&A targets is a prerequisite for the achievement of performance promises.(3)Designing appropriate performance commitment clauses is the key to the realization of performance commitments.(4)Strengthening the supervision of the acquired party is the guarantee for the realization of performance promises.(5)Focusing on risk control is a necessary guarantee for the realization of performance promises.It can be said that the result of the failure of Huayi Brothers’ performance commitment risk control provides experience and lessons for other companies to better use performance commitments,and is of great significance for other companies to successfully achieve performance commitments and promote the development of the capital market.