Study On Goodwill Impairment Of High Premium M&a And Its Economic Consequences

As an important part of China’s capital market activities,M&A restructuring needs to develop more legally and compliantly and actively under the protection of the legal system to inject strong growth force into China’s economy.In recent years,the focus of China’s economy has shifted from heavy industry to high-tech and Internet industries,and emerging industries are gaining momentum with innovation as a driving force for development,making cross-industry M&A an important means of transformation for many traditional industries.Companies choose their M&A targets based on their future development and economic benefits,and tend to pay high consideration to obtain the future value of the target company under the influence of the overall environment.However,innovation-driven emerging industries bring high profits but also imply high barriers to entry and industry barriers.Even if enterprises sign performance commitments with the target companies to guarantee subsequent economic benefits in M&A,due to multiple constraints such as policy environment,economic environment,strategic development and talent team,the M&A target companies may not be able to complete their performance commitments and their development may stagnate.The goodwill resulting from the high consideration paid for the M&A may result in a large amount of goodwill impairment when problems become apparent.With the slowdown of China’s economic growth and the continuous improvement of the legal system in various industries,modern enterprises have changed from the crude development of the past to an innovation-driven and precise strategy-oriented development approach.Many of the companies that participated in the M&A wave in the early stage were unable to adapt to the rapidly changing market situation and failed to make good synergies with the acquired companies,which ended in a disastrous failure.In this context,this paper selects the case of cross-industry merger and acquisition of Internet game company Aegis by traditional manufacturing industry Julong Pipe Industry,and starts from the huge goodwill formed by cross-industry high premium merger and acquisition,and deeply analyzes the goodwill impairment of Aegis and its economic consequences,and finds that: the guidelines are flexible and provide room for goodwill impairment operation,the income method assessment leads to unreasonable merger price,and the performance impairment affected by policy,the performance commitment The study finds that the standard flexibility provides room for goodwill impairment operations,the income approach assessment leads to unreasonable M&A prices,and the policy-influenced performance impairment,performance commitments are difficult to meet and thus lead to large goodwill impairment.The following conclusions are drawn from the analysis based on short-term market reactions,financial performance impacts and analysis of the economic consequences of different subsequent measurement models: the short-term stock market clearly reacts negatively to goodwill impairment events,and the impairment testing method causes dramatic fluctuations in statements.Finally,practical and effective countermeasures are suggested for the impairment of goodwill in cross-industry premium mergers and acquisitions through specific cases.At the macro level,it is recommended that relevant authorities pay attention to the accuracy of M&A asset value assessment in standard setting and supervision,effectively supervise the formulation and implementation of performance commitments,effectively consider the characteristics of goodwill,seek adaptive subsequent measurement methods,and further improve the transparency of information disclosure by listed companies.At the micro level,enterprises should overcome the idea of quick success and quick profit,implement M&A cautiously and reasonably,and at the same time do a good job of post-merger resource synergy to achieve reasonable allocation of limited enterprise resources and effectively reduce the risk of goodwill impairment;investors should improve their own discernment from multiple perspectives,adhere to the value concept and diversify capital risk.