Research On Performance Commitment In Changjiang Health’ M&A Of Huaxin Pharmaceutical

With the rise of mergers and acquisitions in the capital market,M&A has become an imp ortant way for companies to expand market share and achieve new profit growth.The original intention of signing performance commitment agreement in the process of M&A is to reduce the information asymmetry and protect the rights and interests of listed companies and minority shareholders.However,in recent years,there have been frequent litigation cases related to performance commitment in the market,and a large number of target companies have been unable to reach the performance commitment,evading performance compensation and other behaviors,and performance commitment problems have been emerging.The failure of performance commitment due to improper valuation,unreasonable performance commitment setting,lack of awareness of risk prevention,lack of accurate judgment of industry development situation and other reasons is often accompanied by the decline of financial performance of listed companies,negative stock market reaction and other negative consequences,bringing huge losses to enterprises.This deviates from the original intention of introducing performance commitment in M&A,and has a negative impact on the healthy and stable development of capital market.Therefore,performance commitment in M&A has attracted great attention from many enterprises.This thesis chooses Changjiang Health’s acquisition of Huaxin Pharmaceutical as a case,and research the performance commitment problem from the causes and consequences.Firstly,this thesis summarizes the domestic and foreign research results of performance commitment motivation,performance commitment risk,performance commitment failure reasons and consequences,and sorts out the relevant theories of M&A performance commitment.Then,through the detailed sorting of performance commitment cases,focusing on the merger premium,performance commitment setting,regulatory integration after performance commitment and the industry situation of these four factors,to explore the reasons for the failure of performance commitment of Changjiang Health’s acquisition of Huaxin Pharmaceutical.From the financial performance,market response,transformation path and social reputation of the four aspects of the failure of performance commitment to the health of the Changjiang Health.Finally,from the enterprise level,suggestions are put forward to improve performance commitment of listed companies,hoping to provide reference for enterprises to avoid performance commitment risk and improve the application of performance commitment in M&A.The main reasons for the failure of the performance commitment of Changjiang Health’s acquisition of Huaxin Pharmaceutical are as follows:(1)From the perspective of valuation premium,Changjiang Health is affected by high industry valuation and strong M&A intention,and the high valuation premium of Huaxin Pharmaceutical pushes up the expectation of performance commitment.(2)From the perspective of the performance commitment agreement setting,the performance commitment has some setting defects,such as excessively high target setting,single performance commitment index,short performance commitment period and unreasonable payment method.(3)From the point of view of the integration management level during the performance commitment period,Changjiang Health has the problem of insufficient personnel integration and financial supervision of Huaxin Pharmaceutical after the performance commitment.(4)From the perspective of industry situation and changing policies,the industry and policy environment have changed after M&A,and the lack of useful measures to cope with risks has caused pressure on performance commitment performance.Based on the analysis of Changjiang Health’s relevant financial data,it is found that the consequences of this performance commitment failure are mainly manifested in four aspects: impairment of goodwill performance loss,negative market reaction,blocked road of strategic transformation and damage to social reputation.By analyzing the causes and consequences of the failure of performance commitment,this thesis summarizes the problems of performance commitment in M&A,and puts forward some suggestions to improve performance commitment.This thesis argues that due to the incomplete setting of performance commitment and the lack of risk prevention awareness in the application of performance commitment,the risk of M&A increases rather than decreases,which leads to the result of performance commitment deviating from the original intention of both parties,and even causes the target company to lose control and other problems.In order to avoid all kinds of bad consequences of performance commitment to listed companies,this thesis thinks that we should improve performance commitment from enterprise valuation,performance commitment formulation,strengthening integrated management and other aspects.In terms of enterprise valuation,enterprises should consider various factors and characteristics that affect enterprise valuation in the industry,choose appropriate valuation methods,strengthen due diligence on the operation of the target enterprise,and try to avoid the occurrence of high valuation and high premium.In terms of performance commitment formulation,diversified performance commitment standards should be set according to the characteristics of the target enterprise,the betting period of performance commitment should be extended,the transaction and performance compensation payment methods should be designed reasonably,and supplementary clauses for breach of contract can be set according to the situation.At the level of integration after performance commitment,effective financial supervision should be implemented and relevant integration plans implemented in a timely manner.In addition,enterprises should pay attention to industrial policy changes,put risk prevention awareness through the whole process of performance commitment formulation.