Research On "Snake Swallowing Elephant" M&A Strategy Choice And Its Economic Consequences

Today,the economy has been increasingly mature.It has been increasingly hard for small enterprises to break through the obstacles and seek to expand the company’s scale and market share.The market situation in 1980 s has long gone.Hence,only by using operation of the capital market,mergers and acquisitions adopted to achieve more efficient resource allocation,integration and upgrading,can small enterprises nowadays enhance market competitiveness.At this point,"snake swallowing elephant" M&A rose in response to the proper time.As merger and acquisition method for small enterprises to acquire large enterprises,it marks the opportunities and challenges of small businesses to change from weak to strong.Although "snake swallowing elephant" style mergers and acquisitions have their inherent appeal-creating opportunities for small companies to go from weak to strong,nonetheless,successful "snake swallowing elephant" M&A at home and abroad are relatively rare as this mode has its own drawbacks.First,it is even more difficult to operate and achieve.As the acquisition of strong enterprises by weak enterprises needs more planning and more pressure,one tiny mistake in decision will lead to failure of merger and acquisition.Second,it has more obvious risks.In general,in the mode of "snake swallowing elephant" M&A,the acquired parties tend to be large companies which are already in trouble.As a result,it is likely that they will collapse together because they cannot bear the debt pressure of the acquirer instead of bringing performance growth to the acquirer.On this basis,discussion on "snake swallowing elephant" M&A has been rare in China.Besides,empirical research is also difficult to cover this topic.To this end,the case analysis method and financial index method will be used in this study to try to sum up the strategy of "snake swallowing elephant" M&A and the economic consequences in the hope of providing reference for the future "snake swallow elephant" M&A and improving the success rate of M&A.Typical "snake swallowing elephant" M&A case--the MONARCH acquiring Oceano Ceramic was taken as the research case to analyze the strategic choice of MONARCH in this merger and acquisition.The result showed that the choice of target and time of M&A,payment method and corporate integration strategy will crucially affect the performance of M&A.With the help of case analysis and financial index method,the M&A strategy and performance changes of MONARCH’s acquisition of Oceano Ceramic were analyzed.Then the analysis and conclusion can be used for reference by other enterprises,and play a certain reference role for Chinese enterprises to implement "snake swallowing elephant" M&A case in the future.