What matters should you pay attention to in M&A?

Enterprise merger and acquisition, that is, merger and acquisition, is a way of enterprise expansion and growth, and it is one of the most important strategies in modern enterprise development strategy. The transaction object is generally the property right of the enterprise, and the purpose is to obtain the control right of the acquired enterprise. The realization method is to purchase all or part of the property rights or assets of the acquired enterprise in cash, securities or other forms. After the implementation of enterprise merger and acquisition, the acquired enterprise may lose its legal person status, or its legal person status may be retained, but its control right is transferred to the acquirer. The essence of M&A is to gain control. With the promulgation of a series of laws and regulations on enterprise merger and acquisition and the gradual deepening of economic globalization, our domestic enterprises are scattered, too small in scale and weak in competitiveness, forcing the government and enterprises to consider how to make enterprises bigger and stronger, how to occupy the market and how to enhance their competitiveness. The final choice must be strategic merger and industrial integration. After M&A, there are many advantages that are beneficial to the development of enterprises, such as synergistic effect, rational allocation of resources and reduction of internal competition, but there are also a lot of risks, especially financial risks.

1 risk analysis

1. 1 Financing risk M&A often needs a lot of money. If the enterprise raises funds improperly, it will adversely affect the capital structure and financial leverage of the enterprise and increase the financial risk of the enterprise. At the same time, only by raising funds in full and on time can we ensure the smooth progress of mergers and acquisitions. According to the different financing methods, there are two situations:

1. 1.65438+ In addition, the risk of enterprise merger is high, and the amount of funds required is also large, which is difficult for commercial banks to support. Another way of debt financing is to issue corporate bonds. The advantage of raising funds by bonds is that the cost of capital is low, and the interest can be paid before tax, which ensures the control of shareholders and can play the role of financial leverage. However, bond financing also has the following disadvantages: high financing risk, fixed bond maturity and regular interest payment; There are many restrictions, long financing time and limited financing amount. It is not conducive to enterprises to seize opportunities and timely mergers and acquisitions.

1. 1.2 equity financing risk issuing common stock is a basic way for enterprises to raise a large amount of funds. The funds raised have no fixed interest burden, no fixed maturity date and no repayment, and the financing risk is small. However, China has very strict requirements on stock financing. If enterprises want to realize stock financing, it will take a long time, which is not conducive to seize the opportunity of mergers and acquisitions. Moreover, stock financing also has the following shortcomings: ① the capital cost is high, mainly from the net profit, while the interest on debt funds can be deducted before tax; (2) It is easy to disperse the control right, and it is easy to disperse the control right of the company by using common stock to plan, sell new shares and introduce new shareholders. (3) unable to enjoy tax incentives; ④ The pressure of cash dividend payment is great, and stock dividend payment will lead to the decline of earnings per share and stock price per share. Therefore, the use of stock financing to achieve corporate mergers and acquisitions, the risk brought to the acquirer is immeasurable.

1.2 False risk of assets in the evaluation of the target enterprise Due to the information asymmetry between the acquirer and the acquirer, sometimes after the merger is completed, the assets of the acquired party that are favored by the acquirer may be seriously overestimated or even worthless, thus causing significant economic losses to the acquirer. Due to the lack of a series of effective evaluation index systems for enterprise mergers and acquisitions in China, most of the relevant regulations are principled and not feasible. In the process of M&A, human subjectivity has a great influence on M&A, and M&A cannot be implemented according to the law of market value. M&A is essentially a commodity exchange relationship, which needs fully informed information and promotion from both sides. Therefore, it is necessary to establish an intermediary organization to serve M&A, reduce the information cost of both parties and provide guidance and supervision for M&A's behavior.

1.3 Anti-takeover risk If the merger turns into hostile takeover, the acquired party will set up obstacles at any cost, which will increase the acquisition cost of the enterprise and may even lead to the failure of the acquisition. For example, the acquired party takes back its shares and implements anti-takeover measures such as "poison pill plan". 1984 Goldsmith, nicknamed "Financial Crocodile", is going to buy the top 400 Krone companies in the United States. Krone Company adopts the "poison pill plan": First, the dividend will be lowered to make the acquirer unprofitable; Second, it will be announced that new shareholders have no voting rights, and the board of directors will be replaced at most every year 1/3. Any major decision must be approved by two-thirds of the board of directors, so that the acquirer has no right to control the company. Third, the senior person in charge of the company must pay his salary for three years and all his pensions, totaling $654.38 billion, and the backbone of the company must pay his salary for half a year, totaling $30 million, which will make the acquirer bear a heavy financial burden. Although Goldsmith finally succeeded in acquiring Krone Company, he immediately announced the cancellation of the "Poison Pill Plan" as soon as he took office.

1.4 After the merger of business risk and employee resettlement risk is completed, the enterprise may not have a synergistic effect, the resources of both parties are difficult to complement each other, and even the scale may be uneconomical. On the contrary, the whole enterprise may be dragged down by the merged enterprise. Moreover, the acquirer is often required to resettle the employees of the acquired enterprise or pay related expenses. If the acquirer does not handle it properly, it will often bear a heavy burden and increase its management cost and operation cost. There may even be the danger of skilled personnel losing and managers going on strike. Porter, a scholar at Harvard University, said that the wisest acquisition is to "fill the gap", such as one company acquiring another company to enhance its production line or expand its sales territory. "Globalization" acquisitions, such as those that expand the company's important business to other countries, may also work, but cultural and language barriers will damage this merger. In addition, in order to monopolize the market, mergers between direct competitors, such as uniting huge banks and their repeated branches, are usually effective. M&A generally has two traps: First, the company is not well-considered in M&A, and M&A's possible profit is based on unreliable assumptions, which will pay high fees for mergers and acquisitions. Even if everything goes well, it is difficult for the company to recover its investment in the future. Secondly, after the merger, a good merger can make a bad merger desperate, but a bad business often makes a good start fail.

2. Take corresponding measures to reduce risks in the process of M&A.

In order to avoid the above risks, or reduce the risks as much as possible, enterprises should take countermeasures in the following aspects in the process of mergers and acquisitions:

2. Before1m&a, ① reasonably determine the value of the target enterprise to reduce the valuation risk. Information asymmetry is the fundamental reason for the risk of target enterprise value evaluation. Therefore, M&A enterprises should examine and evaluate the target company in detail before merger and acquisition. According to the development plan of the enterprise, the acquirer can hire an investment bank to make a comprehensive plan, and make a comprehensive analysis of the industrial environment, financial situation and operating ability of the target enterprise, so as to make a reasonable expectation of the future profitability of the target enterprise. M&A company can choose different pricing methods according to M&A motivation. M&A company can also use the pricing model comprehensively, such as taking the target enterprise value obtained by liquidation value method as the lower limit of M&A price, taking the enterprise value established by cash flow method as the upper limit of M&A price, and then determining the negotiated price as the M&A price in this range according to the bargaining between the two parties. ② Be alert to the traps in the financial statements of the acquired party, pay more attention to off-balance-sheet contents, whether there are expected liabilities such as pending litigation and bulk guarantee, and whether the main facilities and key equipment are mortgaged to prevent the risk of false assets. (3) On the premise of reasonable arrangement of capital structure, multi-channel financing should be adopted. In addition to bank loans, enterprises should actively use bills, bonds, trusts, financial leasing and after-sale leaseback to avoid "short-term financing and long-term investment" as far as possible to prevent financing risks.

2.2 In M&A, once the target enterprise is determined and the opportunity is seized, it is necessary to advance and retreat, strategize and win a thousand miles. It is not advisable to have a long front, which is time-consuming and laborious, and increases the cost of mergers and acquisitions. What's more, it took a loophole for the "white knight" and fell short. Therefore, it is necessary to look at the target, attack decisively, make a quick decision and succeed in one fell swoop. 1993, Hong Kong Cheung Kong Industrial Co., Ltd. cooperated with China and Thailand to jointly acquire Miramar Hotel with a 50/50 equity agreement, but it ended in failure. In the meantime, of course, the Yang family, the major shareholder, refused, and Henderson Group only acted as a "white knight" in the middle. Using its own strong strength, it began to compete with the acquirer and finally won the acquisition, saving Miramar Hotel.

2.3 After that, we mainly guard against operational risks and employee placement risks. Whether horizontal merger, vertical merger or mixed merger, the purpose of enterprise merger is to produce synergy and greater benefits after merger. First of all, it is necessary to deeply integrate, thoroughly integrate from production, technology, resources, market and other aspects, carry out the overall layout, and produce scale effect. Secondly, the cultural concept is unified. Before the merger, M&A enterprises and the merged enterprises have different development goals, job requirements and management methods. After M&A, we should unify one direction and work for the same goal. Third, properly arrange employees. In the final analysis, enterprise competition is talent competition. Treating the employees of the merged enterprise and the merged enterprise equally and giving them the same welfare and political treatment will stimulate the enthusiasm of the employees of the merged enterprise, and the work of M&A will also be supported by the employees, and the benefits after M&A will be just around the corner. In 2008, Henan Yongmei Group, Hemei Group, Coking Coal Group, Zhongyuan Dahua and Provincial Gas Company achieved strong alliance. Through deep integration, re-division of labor and implementation of "six unifications", Henan Coal Industry Group Company was established and developed into the largest, strongest, most dynamic and growing industrial enterprise in Henan Province.

Professor Staiger, who won the Nobel Prize in Economics, found in his research that the world's top 500 enterprises all developed through asset joint operation, merger, acquisition, equity participation and holding, that is to say, if an enterprise only relies on its own slow capital accumulation, it is unlikely to become big. Therefore, M&A is the only way for enterprises to become bigger and stronger. Reasonably estimating the risks of M&A, minimizing the costs of M&A, obtaining the best benefits of M&A, and enabling China enterprises to expand their scale and enhance their strength as soon as possible are the best policies to cope with the current international economic crisis.