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Analysis on the risk and prevention strategy of private enterprises financial crisis under the M & A

Author: ZhouHaoMing From: www.yourpaper.net Posted: 2010-06-03 08:14:08 Read:
Keywords: the information asymmetry risk of acquisition of private enterprises
Abstract: in the financial crisis; impact, many small and medium enterprises operating difficulties, or even into bankruptcy, merger and acquisition opportunities to bring high-quality private enterprises.But private enterprises in the merger and acquisition process, is also facing the cash flow risk, information asymmetry risk, policy risk, management risk of inducing efficiency, failure risk of merger & acquisition.The risk is eliminated through the following measures and methods, so as to achieve the success of M & A: the combination of private enterprises, their own choice for the development of M & A; efforts to eliminate the information asymmetry; optimization decision procedure; handling properly the relationship with the government.
Effect of , M & a private enterprise
(a) the definition of private enterprise merger.
Private enterprise M & A (MergersandAcquisitions, M& A) including private enterprises mergers and acquisitions two meanings, namely private claw l industry asked the merger and acquisition.It is a private enterprise legal person, in the equal voluntary, equivalence paid basis, other legal person property rights in economy, private enterprise is a major form of capital operation and management.
(two) effects of private enterprise M & A.
The success of the private enterprise merger takes to the acquiring party brings a series of effects, mainly:
(1) Weston synergistic effect.Private enterprise merger and acquisition will bring private enterprises improve production efficiency, the most obvious effect is achieved economies of scale, often referred to as 1 1) 2 effect.
(2) the market share effect.Through M & A can improve the control ability of private enterprises on the market.
(3) experienced cost curve effect.Experience includes private companies in the technology, market, patent, product, management and private enterprise culture and other aspects of the specialty.Can share the goal of private enterprises through the acquisition of learning experience, reduce the cost of private enterprises have to pay for the accumulation of experience, the development of private enterprise cost saving.
(4) the financial synergy effect.The merger and acquisition will bring benefits to the private enterprises in the financial aspects, achieve the benefit is due to the tax law, accounting practices and securities trading inherent role monetary benefits, there are tax avoidance effect and price effect.
(5) obtain strategic opportunity effect.First, through mergers and acquisitions can directly obtain sector development research is the management target of private enterprises; second, through mergers and acquisitions can be reduced to a competitor, and direct access to its position in the industry; third, after the merger the two private enterprises system and price policy, can make them get than before the acquisition compete the return.
two, the impact of the financial crisis creates good opportunities for the private enterprise merges
(a) shrinking external demand led to China's industrial growth rate dropped sharply, profit decrease.
Since the second half of 2008, solid industrial growth fell significantly, especially L1 months, industrial added value year-on-year growth rate of only 5.4%, to nearly l0 year low.In 2009 February, the industrial added value growth rate up to 1l%, but the first 2 months of 2009, the industrial added value of the cumulative increase was only 3.8% (Figure 1).At the same time, a sudden turn for the worse profitability of industrial enterprises, private enterprises above Designated Size industrial profit growth rate hit a new low in the past 10 years.

(two) the overall business conditions of private enterprises is poor, the private enterprise's confidence suffered a serious setback.
Affected by the financial crisis, since private enterprise boom index in the second half of 2008 since the rapid decline, private enterprise boom index fell to the 3 quarter of 2003 lows.Private entrepreneurs confidence index has waned in recent years, new low record (see Figure 2).Private enterprise boom index and entrepreneurs confidence index decline reflects the vitality of industrial economic development is lack of.From the Chinese private entrepreneurs survey system results also show that the private enterprise management status, "good" private enterprises accounted for 32.4%, think "general" accounted for 48.3%, think "bad" accounted for 19.3%, think "good" that "more than 13.1 percentage points of the poor", this results in the past 30 percentage points lower than in 2007, the lowest level in nearly 5 years.

On 2008, Chinese private enterprises profit growth compared with 2007 has greatly decreased, in contrast, private enterprises the main business income of the reduction is not much.This shows, private enterprises profit margins larger, annual profit shrunk is mainly affected by the 4 quarter of drag (see Figure 3).The National Bureau of statistics data show, 2008 9 - November private enterprises the main business revenue growth slowed sharply to 12.3% (1 - August 29.2%), private enterprises net profit before tax rate from 6.5% to 5.5% in 2007 from the same month contraction.In the financial crisis hit, many private enterprises in the loss of bankruptcy.In the center of Dongguan City, Chinese manufacturing industry as an example, in 2008, more than 40000 private enterprises registered in management, small and medium-sized private enterprises losses or failing to reach about 12000.This is outstanding private enterprises in low cost expansion creates good opportunities

The risk of type
three , private enterprise M & A
(a) the cash flow risk.
In the process of mergers and acquisitions, income often occurs in the long term, while spending in the recent.Many private enterprises tend to this lack of a clear understanding of their own strength, a clear understanding of the ability to integrate, overestimate yourself, in financial strength, technical ability, management ability is insufficient, only with a passion to mergers and acquisitions.This more than their own financial ability to "the snake swallows an M & a like", often make private enterprises difficult to continue the phenomenon in mergers and acquisitions, capital spending after the occurrence of liquidity difficulties.
(two) the risk of information asymmetry
The 1 financial statement information risk.The target of private enterprises to financial reporting from the perspective of "cosmetic packaging", provide inaccurate financial report data directly caused by private enterprises to merger gains and risk estimation problems, mainly for the benefit and risk of overestimating underestimate, increased M & a risks.
2 asset price risk assessment.The target of private enterprises often overestimate their value in the value, in order to improve their selling price.Merging the enterprise if not through detailed analysis of the investigation, that blind optimism, hasty conclusion, will be not good to protect your interests, or even unreasonable loss of private enterprises to sell high-priced.
3 or debt risk.The so-called hidden debt or debt refers to mergers and acquisitions of private enterprise formed by the external guarantee.Once the private enterprise merger agreement signing, target the private enterprise economy, all are transferred to the bidder who, creditors have to find a home for the unwitting acquisition of private enterprises to assume responsibility for security, large amounts of hidden debt surfaced, some invisible black hole gradually exposed, the huge debt of the private enterprise in lawsuit the debt dispute quagmire, lawsuits, disadvantage suffer for the faults of another.
(three) policy-induced risks
Merger and acquisition activities of private enterprises are private enterprises face the fierce market competition, an expansion approach and active choice in order to survive and develop.However, private enterprise merger and acquisition part is not entirely a market economy behavior.The government for saving the loss of private enterprises, the proper placement of workers, maintain social stability considerations, difficulties of private enterprise merger and acquisition encourage the advantages of private enterprises.But ultimately failed to preferential policies implemented in some cases of acquisition, the reasons are the following: (1) some government officials at the time as soon as possible to the completion of the merger, to exceed its authority commitments (such as land leasing, tax incentives and other).(2) some department leadership promises because of its adjustable thousand, the next leadership refuses to honor.And some private enterprises in order to gain the support of the government, not from the point of view of their own strength, for not knowing and crustily skin of head of mergers and acquisitions, mergers and acquisitions decision from the beginning of latent risk.Because there is no formation of a sound, effective policy faithful mechanism, this lack of restraint measures accordingly, due to a lack of policy credibility risks often can only be undertaken by the purchaser.
(four) the efficiency of management to reduce the risk of.
Private enterprise merger and acquisition is to a certain extent, expanded its ability to resist risks, but if the scale is too large, the branches increased, increased the difficulty of management, management efficiency, potential threats are not eliminated, large private enterprises will be bankrupt.
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