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Financial risk and prevention of enterprise merger and acquisition

Author: BaoLiQiong From: www.yourpaper.net Posted: 2010-06-01 11:35:02 Read:
Keywords: the financial risk of M & a risk prevention and
Abstract: the merger and acquisition of
between enterprises, is a high-risk business activities, risk throughout the M & A activity all the time, the financial risk is the most important influence factors of success or failure of the merger.Therefore, to strengthen the control and prevention of financial risk of M & A, high risk management of mergers and acquisitions, mergers and acquisitions to guide practice, improve the efficiency of M & A, has a very important practical significance.
1 mergers and acquisitions of financial risks and the causes of
1.1
pricing risk
Pricing risk refers to the risk evaluation of Target Corp.That is due to the acquisition of the assets of the Target Corp value and profitability (profitability) overestimated, and bid too high and exceeded their capacity, although Target Corp work well, the high price also cannot make the acquirer obtain a satisfactory return.Pricing risk mainly includes the risk and value of Target Corp financial statements for Target Corp risk assessment.Financial reporting risk refers to the Target Corp's financial report the problems and the false and to bring the risk of loss.The financial report is the evaluation and an important basis for determining the transaction price of M & A, its authenticity is very important for the whole transaction; to assess the value of the Target Corp may be due to improper prediction is not accurate enough, it produces the value assessment of risk of M & A.Evaluation result of incorrect acquirer asset is indebted rate is exorbitant and Target Corp can not bring the expected profit and financial difficulties, or even lead to the failure of M &.So the evaluation of the Target Corp is the essence of the M & a transaction, the key for every successful merger lies in finding the right price.

1.2 financing risk
Mergers and acquisitions often requires a lot of money.M & A financing risk mainly refers to the enterprise can timely to raise funds and funds raised by merger and acquisition of enterprises after merger and acquisition.Specifically, the financing risk including capital risk and capital risk bearing.Capital risk is due to corporate reputation is not high, debt paying ability is not strong, the expected effect of limited income, financing scale and other factors, enterprise debt financing, absorbing direct investment and equity issuance is weak and unable to timely obtain mergers and acquisitions funds required risk; capital bearing risk is due to merger scale is too large, exceed the enterprise's financing ability and the risk.In the actual financing operation, as the principal part of financing enterprises must consider its capital structure is reasonable, due to the repayment of principal and interest, in order to prevent the impact of financing risk.Merger and acquisition of enterprises according to the capital structure of acquirer and Target Corp have, scientific and rational arrangement of M & A financing mode of financing, financing costs, financing deadline, to cooperate effectively, and the comprehensive consideration of various factors, selection can make the enterprise comprehensive capital cost rate is low, so the financing scheme of enterprise value maximum.

1.3 solvency risk
The risk of debt that is due to the future cash flow of new enterprises is uncertain, the new enterprises because of the lack of sufficient funds to pay the capital structure deterioration, possibility of debt ratio is too high and lead to bankruptcy.The acquirer payment when the choice, generally have the cash to pay, pay equity and leveraged payment to pay by cash, debt risk in the acquisition of behavior is very important.If the merger financing ability is poor, the cash flow of improper arrangement, liquidity ratio will be substantially reduced, thereby affecting its short-term debt-paying ability.If the acquirer will be short-term loans for mergers and acquisitions, once the external financing conditions, solvency crisis will be difficult to avoid.
1.4 financial integration risk
The merger deal, M & A has control over the operation of Target Corp has just completed the first step, and then, also must be integrated development of the company, and the integration of financial is extremely important, if integrated properly, previously hidden financial risk is likely to erupt, causes the enterprise to deal with difficult, even lead to the failure of M &.Mergers and acquisitions of financial integration between success and failure, success of M & A integration of financial integration is successful, a failure of M & A integration for financial integration failure.The efficiency of enterprises mainly depends on the enterprise assets used, visible after the integration of the enterprise efficiency, must take effective financial integration as the foundation, so the financial integration is the enterprise M & A integration is the core content and an important link, not only in relation to the strategic intention can implement, but also related to the principal and the company can be the implementation of effective control of Target Corp.
2 acquisition of the financial risk prevention measures of
2.1 prudent selection of target enterprises, strengthen the financial information of the target enterprise effective and reasonable utilization, in order to reduce the risk of
Information asymmetry is the fundamental cause of excessive pricing risk, so the acquiring party should give full consideration to the environment and their own financial situation, not blindly believe the financial and accounting reports provided by the Target Corp, is responsible for the detailed due diligence, mergers and acquisitions of financial risk prevention.Qualified enterprises to conduct a comprehensive analysis of hired investment banks to the goal enterprise industry environment, financial condition, profitability and cash flow situation, to make the reasonable expectations of future earnings target enterprises, and on this basis to fully estimate the possible financial pressure and the combined effect of M & A, the target company valuation the more close to the true value, to the greatest extent avoid merger and acquisition pricing risk.
2.2 timely made acquisitions funds needed to reduce the financing risks of
In the implementation of mergers and acquisitions, mergers and acquisitions to develop comprehensive budget, including: M & A total amount of funds needed for the budget, capital expenditure of time, capital expenditure budget amount of budget and capital expenditure program budget.Enterprises in the development of M & a comprehensive budget, it should start to raise funds, financing decision.The acquirer shall combine different financing channels, to achieve internal and external balance, to ensure that the target enterprise evaluation can be determined by the merger, restructuring and integration, promoting the smooth.To determine a reasonable financing structure should follow the principle of minimum capital cost, both to compare the cost of raising equity capital, equity capital and debt capital, but also were analysis of three its marginal revenue and marginal cost; secondly, to make their own capital, equity capital and debt capital to maintain an appropriate proportion; finally on composition and term of debt capital structure is analyzed, the enterprise future cash flow and liquidate debt flows according to the duration of matching, liquidity enterprises find the future funding of weak point, then the term, long-term debt and short-term debt amounts to adjust the structure, in order to ensure the full and timely to raise the funds needed to reduce the M & A financing risk.
2.3 reasonable choice of payment, time and number to reduce the risk of debt
And enough to pay the general way with cash, stock and hybrid payment in three ways.Cash payment can quickly complete the transaction, reduce transaction uncertainty, but the risk of debt is higher; pay by stock, low cost and can make the shareholders of the Target Corp jointly undertake the development of risk after the enterprise is merged, and the shareholders of the Target Corp may also reasonably escape of equity transfer profits tax, the risk of debt than cash payment, but the procedure is more complicated mixing between cash payment; payment of debt risk is between cash payment and stock payment.The enterprises can combine their available resource flow, equity per share dilution, price uncertainty, the change of ownership structure, the target enterprise tax situation, carried on the structure design of payment, payment methods were arranged in various combinations of cash, debt and equity, in order to meet the acquisition of the two sides need to learn from each other.In addition, mergers and acquisitions of enterprises through the analysis of the term structure of assets and liabilities, will be the future cash flow and outflow packaging combination according to the period, find out the real cash flow and capital gap time, constantly adjust their assets and liabilities structure to prevent the risk of debt.
2.4 timely, effective financial integration after M & A, in order to realize the maximization of enterprise value
The acquiring party according to the merger agreement to obtain ownership of assets, stock or the control right of enterprise M & A, just go over the assets adjustment process.And in a sense, M & easy integration difficult, mergers and acquisitions in the realization of strategic integration, the integration of human capital integration and culture at the same time, must be timely and effective financial integration.Because of financial management is the core and the central enterprise management system, it is not only related to the strategic intention can implement, but also related to the final realization of M & A can carry out effective control and acquisition of the target enterprise.Enterprises should be based on financial management goal orientation, financial management system, accounting system, the stock of assets, performance evaluation system, internal control of cash flow and financial organization timely, effective integration, the two sides of M & A in the implementation of integrated fusion, improve the overall performance of the common enterprise, the maximization of enterprise value reached after integration
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