A Case Study On The Impact Of Company D’s Unfulfilled Performance Promise

With the increasingly severe international competition and the introduction of new development concepts,many Chinese enterprises have focused on the mode of the M&A in order to improve their strategic layout and enhance business diversification.In 2014,in order to comply with the development trend of the market,the regulators of the capital market made in-depth adjustments to the rules and regulations related to M&A activities.Subsequently,the scale of M&A transactions has grown significantly.However,in recent years,the M&A activities in the market have shown a phenomenon of "high valuation,high commitment,and high goodwill".In most M&A transactions,performance commitments are the core terms.On the one hand,performance commitments push up the value of assets,on the other hand,highly valued assets also need the support of profit commitments.Under the above background,what is the actual effect of the performance commitment,whether the purpose of the acquirer can be achieved,and if the commitment is not fulfilled,what kind of impact it will have on all parties involved in M&A transactions,especially listed companies and small and medium shareholders,is worthy of in-depth study.This article takes D’s merger and acquisition of P’s unfulfilled performance promise as an example to discuss the impact of small and medium shareholders of listed companies because the target company fails to reach the promised level.The research in this paper concludes: First,the performance commitment can have a positive effect on small and medium shareholders in the short term;second,the cumulative net profit is used as an indicator of whether the acquired party is compensated,which to a certain extent conceals the operating risk of the underlying asset and cannot be provided in a timely manner.Listed companies and small and medium shareholders provide warnings,and at the same time provide operating space for the acquired party’s earnings management;third,failure to fulfill the set performance promises will cause serious damage to small and medium shareholders.