A Case Study On The Failure Of Enterprise Premium M&A

In recent years,mergers and acquisitions have become an important means of enterprise expansion,as they can help enterprises quickly acquire core technology,gain more resources,and thus have stronger core competitiveness in the fierce market competition,achieving rapid development of enterprises.As a result,M&A have become an important means of enterprise expansion,and the M&A premium has also continuously increased with the rise of the M&A wave.With the progress of all aspects of society and the support of national policies,the communication service industry has been favored by the M&A market due to its rapid technological updates and high product added value,and the phenomenon of high premiums is also common.However,the results of M&As are not necessarily successful,and the premium is accompanied by risks.Premium M&A typically has the characteristics of "high valuation,high risk,and high performance commitment." Higher performance commitment will increase the risk of performance failure,making the probability of M&A failure increase.Based on this background,it is of great significance to find the reasons for the failure of premium M&A.Zhongjia Bochuang is an enterprise that has entered the communication service industry through multiple premium mergers and acquisitions.In order to accelerate the development of the enterprise,it acquired Jiahua Information at a premium of 10.88 times in 2018.In 2020,due to the failure of Jiahua Information’s performance commitments,problems such as unreasonable M&A plans and inadequate integration were exposed during the M&A process,which ultimately led to the failure of Zhongjia Bochuang’s M&A of Jiahua Information.Zhongjia Bochuang excluded Jiahua Information from its consolidated statements,which also became one of the typical failure cases of premium M&A in that year.This thesis takes the information of Zhongjiachuang premium M&A as an example to analyze,adopts the method of combining cases and theories,deeply analyzes the causes and consequences of the failure of premium M&A,to help enterprises find out the problems in the process of premium M&A,and finally draw relevant inspiration to provide reference for the M&A activities of enterprises.This thesis mainly includes the following parts.The first part is an introduction and a theoretical overview.Firstly,the research background and significance of this thesis are introduced,including the causes,negative effects,failure reasons and countermeasures.On the basis of summarizing the existing research results,the research ideas,methods and basic framework are a theoretical foundation for the following analysis.The second part is the case introduction of the premium acquisition of Jiahua Information.Firstly,this thesis introduces the information of the acquisition company and the development history and main business;secondly,it introduces the whole process from the acquisition intention to the final failure;the last thesis analyzes the reasons of the premium from the aspects of reporting limitations,valuation method and expected synergies.The third part is the analysis of the consequences of the failure of the merger.Firstly,the analysis trend of financial indicators after the result showed that the profitability,operating capacity and solvency of Chuang decreased,and the market risk of the enterprise was increased.Second,it was found that after the delisting risk increased,the stock price fell successively,and the cumulative excess yield becomes negative.The fourth part is the reason analysis of the failure of the acquisition of Jiahua Information.This thesis analyzes the timing order of M&A activities,in the early stage of the rationality of the valuation,the high setting of performance commitment target,the improved performance assessment method and the lack of the financial integration,operation integration and human resource integration of Jiahua information.The fifth part is the conclusions and inspirations drawn.Firstly,through the analysis of the case,the failure of the premium merger leads to the failure of the financial situation and market reaction;second,the inadequate preparation of the early stage to promote the failure of the premium merger.Fourth,the failure of the failure of the premium merger is the failure of the late stage,the late stage of the merger and acquisition,and prevent the loss of control.