Research On Financial Risks Induced By Performance Commitment Of Company N M&A Company F

With the swift pace of China’s economy,more and more enterprises take the way of M&A to ease the pressure of competition.In 2021,the number of M&A transaction plans disclosed in the Chinese market has exceeded 7400,and performance commitments have been widely used in this process.However,the breach of performance commitments has gradually increased in recent years,created some financial risks such as performance fraud and goodwill fallen,which have adversely affected the development of enterprises and added unstable elements to the economy market.So how to effectively identify and prevent the financial risks created by performance commitments,will help the acquirer to evade these financial risks,and maintain the stability of the M&A market.This paper selects the story of N company’s merger and acquisition of F company,and from the three stages of formulation period,implementation period,expiration period,to analyzes the financial risks of performance commitment,and put forward countermeasures from two aspects:acquirers optimize the operating mechanism of performance commitments,regulators strengthen the risk control of performance commitments,which may help acquirers and regulators to get rid of financial risks on performance commitments.The research unearthed that,during the performance commitment formulation period,the information held by the two parties in the merger and acquisition is not synchronized,which is easy to raise the valuation and drive up the performance target.During the performance commitment implementation period,in order to avoid compensation,the target company often takes short-sighted behavior,which will easily creates the performance fraud and information disclosure.When the performance commitment expires,the acquirer will likely fall into huge losses,which will easily makes the goodwill fallen and compensation default.Therefore,all parties should view the performance commitments rationally.The acquirers should optimize the valuation process,performance commitment terms and post-merger internal management,the regulators should strengthen the target valuation review and information disclosure management,so that make the performance commitments be better applied.