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Analysis and prevention of the financial risks of enterprise merger and acquisition

Author: SunRuiJuan YingYanHua From: www.yourpaper.net Posted: 2010-06-03 02:44:34 Read:
Keywords: the financial risk of enterprise merger and acquisition risk
Abstract: merger because it can bring the enterprise such as economies of scale, resource allocation, collaborative effect while chasing for'3- this world business.The financial risks of enterprise merger and acquisition is caused by merger and acquisition pricing, financing, payment and other financial decision-making, is an important factor affecting the success or failure of the merger.By defining the financial risk of M & A of enterprises, analyzing the source of financial risk in M & A, proposed the control and prevention of financial risk of M & A of enterprises, in order to reduce the risk of merger and acquisition, improve the success rate of M & a activity.
The financial risk of M & a definition of 1
On the financial risk of M & A, there are various definitions.Zhao Xianwu thinks, enterprise mergers and acquisitions of financial risk refers to the risk and financing and capital structure changes caused by the financial crisis, and even lead to the possibility of bankruptcy, at the same time, mergers and acquisitions lead to shareholder income increased volatility is also a form of financial risk.Geoffrey.C. Hooke thinks, the financial risk of the enterprise merger is due to acquisition financing through borrowing and restricting the buyer to cause business financing and debt capacity, "financial risk for trade financing by debt and will be made by the target enterprises to purchase their debt amount and other factors."A: the risk from the results, the above definition indeed generalizes the core part of enterprise financial risk of M & A, that is caused by the risk of debt financing decision.But from the sources of risk, financing decision does not seem to be the only cause of solvency risk and shareholder return risk.M & A activity in the enterprise, decision-making related to financial results include pricing and payment decision.
First of all, the enterprise merger and acquisition is a kind of investment behavior, and then is a kind of financing, investment and financing decisions affect the financial situation of enterprises after merger and acquisition; "2 second, M & A is a kind of investment behavior, from planning and design to the completion of the transaction, the various value factors and is reflected not immediately in the short term financial indicators, and must go through a period of integration and operation, to achieve the value target; third, lower limit value goal of M & A is not only to ensure that no debt risk, but to get a far more than the value of the debt category expected goal, realize the value.Therefore, if only in the financing risk as a measure of financial risk, in a certain sense reduces the value of M & A of motivation.So, from the perspective of corporate finance, the financial risk of the enterprise merger should contain a broader connotation, including "due to mergers and acquisitions and corporate financial enterprises involved caused the financial activities of the financial risk of M & A should refer to the deterioration of the financial situation of enterprises and financial achievement losses caused by merger and acquisition pricing, financing, payment and other financial decisions the uncertainty of the M & A, is expected value and value realization of serious negative deviation caused by the financial difficulties of enterprises and financial crisis.Or, the financial risk of the enterprise merger is a kind of value at risk, is the comprehensive reflection of various M & a risk in value, runs through the whole process of enterprise merger and acquisition of the uncertainty of the expected value of the negative effects of.
The financial risk of M & a source
2
A complete merger and acquisition activity usually includes the choice of the target enterprise, the target enterprise value evaluation, feasibility analysis, M & M & A financing, bid method and the integration after merger, the link of all possible risks.The financial risk of M & A is mainly from the following three aspects:
2.1 pricing risk
Pricing risk mainly refers to the target enterprise value assessment of risk.That is due to the acquisition of the target enterprise value of the assets and the profit ability is overestimated, and bid too high and exceeded their capacity, although the target enterprise operation is very good, the price is too high will not cause the buyer to obtain a satisfactory return.The target company valuation depends on M & a business to its future returns the size and timing of expected, on the value assessment of the target enterprise may be inappropriate and inaccurate prediction.This produces the acquisition of the company's valuation of risk, which depends on the size of M & A enterprises grasp the information quality, and information quality depends on the following factors:
2.1.1 the target enterprise is listed or unlisted companies
If the target enterprise is the listed companies, since it must publish information, business conditions and financial statements of foreign mergers and acquisitions so, easy to obtain the target enterprise data analysis; target enterprise if the non-listed companies, the merger enterprise must through the target enterprise cooperation to obtain the corresponding information.
2.1.2 is a bona fide acquisition merger or takeover
If the M & A is well-intentioned, M & A can fully exchange and communication of information, the target enterprises will take the initiative to provide the necessary information to the merger and acquisition of enterprises.This helps to reduce the cost and risk of M & A, also can avoid the target enterprise management intends to resist and increase the cost of the acquisition.If the M & A is malicious, mergers and acquisitions will not from the target enterprise to obtain the actual operation, financial situation, the main information, bring difficulties to the corporate valuation.
2.1.3 acquisition time to prepare
M & a preparation stage is longer, get the target enterprises between the relevant data will be more detailed and fully, the target enterprise evaluation more accurate.
2.1.4 target enterprise audit and M & a time length
If the acquisition time is far from an accounting firm to audit time, M & A enterprises to obtain more information from the annual report is not representative of the target enterprise of business and financial status, the target company valuation is not accurate.
2.2 financing risk
Merger and acquisition of enterprises need a lot of money, but because of China's current capital market development is not perfect, the bank and other intermediary organizations also failed to fully play its due role in mergers and acquisitions, the merger and acquisition of enterprises face greater risk of financing.Financing risk is mainly manifested in the M & A can timely access to funds, whether the financing ways to influence the control of enterprises, financing structure effects on corporate debt structure and repayment ability.For example, the financing structure including debt capital of capital and equity capital structure, debt capital in short-term debt and long-term debt structure.In the financing structure based on the debt capital, when the actual effect after the merger does not live up to expectations, may cause the interest payments on debt risk and risk; financing structure based on equity capital, when the actual effect after the merger is not up to the expectations, the interests of the shareholders will be damaged, thus providing the opportunity as a hostile takeover; even pays the takeover price completely to its own funds, there are certain financial risk, once the enterprise has its own funds for the acquisition and financing difficulties, not only caused the opportunity cost increases, will produce new financial risks.
2.3 payment risk
Mainly refers to the acquisition of the risk of the use of funds and liquidity and equity dilution, its risk and financing risk, debt is closely related to.Payment risk is mainly manifested in two aspects:
Liquidity risk 2.3.1 cash generation and ultimately lead to the debt risk
Cash payment tool itself defects, will bring certain risks to mergers and acquisitions.First of all, the use of cash payment tool, is a huge instant cash burden, pressure, the cash is relatively large; secondly, the use of cash payment, transaction size is often affected by the capacity constraints; furthermore, from the buyers point of view, because no delayed acknowledgement and transfer of capital gains the realization of the capital gain, and thus can not enjoy preferential tax, equity and other reasons, can not have the new company, but not welcome cash, this will affect the successful acquisition opportunities, bring the risks associated with.
2.3.2 lever to pay debt risk
The payment of the debt leverage risk is the risk of leveraged buyouts.Leveraged buyout that mergers and acquisitions of enterprises through debt to obtain the target enterprise's equity or assets, and cash flow of the target enterprise debt repayment.To solve the problem of leveraged buyout funds in the acquisition of the debt, and expects to receive the benefit on financial leverage in mergers and acquisitions.Due to high risk bond capital cost is very high, and the acquisition target enterprise future cash flow is uncertain, leveraged buyout must achieve very high returns to acquirers benefit, otherwise, the acquiring company may be due to the deterioration of capital structure, debt ratio is too high, can not afford to pay the principal and interest and bankruptcy.
preventive measures of financial risk of enterprise merger and acquisition of 3
3.1 improve access to information quality, evaluation method using the appropriate target enterprise value
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