Research On The Causes And Economic Consequences Of SINBON Pharmaceutical’s Goodwill Impairment

Since 2013,with the relaxation of merger and reorganization policies in my country,various industries have joined the wave of mergers and acquisitions.High-premium mergers and acquisitions are commonplace.The scale of market goodwill has been soaring.Blind mergers and acquisitions,cash-out opportunities,and profit transfer have emerged in endless chaos.The "Analysis Report on Market Prospects and Investment Strategic Planning of China’s Pharmaceutical Industry" shows that my country’s pharmaceutical market exceeded 2 trillion yuan in 2013 and showed a rapid growth trend.It is expected that the market will further expand in the following years.Because of this,many companies in China’s pharmaceutical industry have continued to join the merger and reorganization market to gain a foothold in the promising pharmaceutical market and complete the modernization of the industrial chain.According to Pw C statistics,the size of the merger market in my country’s pharmaceutical industry in 2015 was as high as 311.59.One hundred million U.S.dollars.However,with the macroeconomic downturn and the expiration of the three-year M&A performance gambling agreement,the scale of goodwill thunders and impairments in the A-share market in the past three years has surged.In 2018,the impairment of goodwill reached the highest level in history.The scale reached163.469 billion yuan,which has eased in 2019 compared with the previous year,but the situation is still not optimistic.Among them,the impairment of goodwill in the pharmaceutical industry ranks in the forefront of all industries.The huge impairment of goodwill not only triggers a mutiny in business performance,but also leads to turbulence in the stock market.The impairment of goodwill has attracted widespread attention from regulatory agencies and market investors.This paper selects SINBON Pharmaceuticals,a typical enterprise for impairment of goodwill in the pharmaceutical industry in 2018,as the case study object,focusing on the core of "goodwill impairment motivation,short-term market response to impairment,and goodwill duration and changes in financial performance after impairment" Investigate.In the previous part of the case,this article reviews and summarizes the concepts of goodwill and impairment,information asymmetry,and conceit hypothesis.In the case study part,this article first sorted out the whole process of Sinopeptide biochemical transaction,the target of SINBON Pharmaceutical’s acquisition,and focused on the formation and impairment of goodwill.This article summarizes the reasons for SINBON Pharmaceuticals’ one-time provision of a huge impairment of goodwill into four aspects: changes in the macro environment have caused major changes in performance;the underlying profit forecast is too optimistic;the valuation of mergers and acquisitions is likely to be overestimated;the management has earnings management motivation.When analyzing the market reaction of goodwill impairment,this article adopts the event research method to analyze the short-term reaction of the market to the enterprise’s provision of goodwill impairment.The study finds that goodwill impairment will bring negative effects in the short term,and the impairment will seriously affect the enterprise in the year.Net profit and various profit indicators,but since the impairment of goodwill does not actually affect the company ’ s operating capacity and cash flow,the market ’ s response is strong but not sustained.When analyzing the duration of goodwill and changes in financial performance after impairment,this article uses the entropy method to deal with the financial evaluation index system of SINBON Pharmaceuticals,calculates the scores of various financial indicators from 2015 to2019,and analyzes the impact of goodwill impairment on financial performance in the current year.The impact is mainly on debt servicing and profitability,with limited impact on operations and development capabilities.However,the impairment of goodwill is inextricably linked to the development of the enterprise.Although it cannot directly affect the growth rate of the main business and the net sales margin,the impairment of goodwill of the enterprise can reflect the future operating conditions.In response to the above case study analysis,this article puts forward five suggestions:(1)Appraise the value of the subject carefully and reasonably;(2)Correctly view the performance commitment compensation agreement;(3)Focus on business integration after mergers and acquisitions;(4)Improve the follow-up measurement of goodwill Methods;(5)Strengthen information disclosure and external supervision.