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The main risk of enterprise merger and acquisition in China and its avoidance

Author: HanRunE From: www.yourpaper.net Posted: 2010-06-06 14:15:31 Read:
[Keywords] M & M & a risk aversion
[Abstract] M & A risks according to the time sequence can be divided into M & a preparation stage, execution risk risk of M & A and M & A integration stage of the three kinds of risks.Make correct M & a strategy, the establishment of a complete risk management mechanism, strengthen internal control, culture and human resources integration, is an effective way to avoid the risk of M & A.
Affected by the financial crisis, some enterprises assets shrink dramatically, low price brings M & a opportunities.In 2008, China's overseas mergers and acquisitions rose to $20500000000, accounting for 50% of total investment in foreign.But the statistical data of world famous consulting consulting company suggests that, in the global large-scale enterprises merger cases in the past 20 years, achieve the desired results was less than 50%, while China's 67% overseas acquisitions is not successful.The main reason lies in the existence of M & A is not successful merger risk.It is because of various uncertainties exist the possibility of leading to failure of M & A and make the enterprise loss.M & A transactions often involve property right, system, and policy and dynamic is very strong, and our country some state-owned enterprises in the industrial structure and product structure is not reasonable, the social security system is not perfect, to the enterprise merger and acquisition brought considerable risk.For M & a security operation is considered, it is necessary to correctly analyze the main risk in M & A and to avoid.
The main risk , China's M & A analysis of
The time sequence of M & a risk in China by M & A are can be divided into M & a preparation stage, execution risk risk of M & A and M & A integration stage of the three kinds of risks.
(a) the preparation phase of the risk analysis
1 safety barriers risk.Although most countries welcome foreign investment, but they set the relevant laws to restrict foreign funds to enter the national key field.The developed countries for restrictions on foreign investment in general is the common reason of "national security", "culture and the national tradition".If the enterprise M & A of such risks underestimated, it may not reach the expected goal.In 2009, Aluminium Corp and the Australian Rio Tinto deal fails.Factors of security and other market is one of the important reasons.
The 2 M & a strategy risk.It is the enterprise do not have a clear strategic M & A.In our country, the value of the target enterprise is overvalued, or blind diversification, but due to the merger and acquisition technology, equipment, management, marketing and sales, are not allowed to grasp, lead to mistakes in decision-making, risk.The two is the merger and acquisition strategy mistakes, not in accordance with the company's actual.A suitable strategy to best all company is not exist, each company must according to their position in the market and its objectives, resources and opportunities, identify a suitable strategy, otherwise it will produce a risk.McKinsey Co 2008 sampling survey to the Chinese enterprises overseas M & a display, only 50% of the enterprises set up the Multi-National Corporation target.
(two) the implementation stage of risk analysis
1 pricing risk and payment risk.Pricing risk, that is due to the acquisition of the target enterprise value of the assets and profitability 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.Payment risk is mainly manifested in three aspects: one is the liquidity risk of cash payment and ultimately lead to the debt risk; two is the equity pay equity dilution risk; three is the lever to pay debt risk.Different choice of payment method of payment risks for the final performance of the pay structure is irrational, the cash to pay too much, so that the integration of operation funds during the pressure is too large.
2 financing risk.Financing risk mainly refers to the merger and acquisition funding risk guarantee of capital and capital structure is related to the.Including the need to ensure funds whether in quantity and time, financing for the merger motives, the debt burden will affect the normal production and operation of enterprises.Related to M & A financing risk is a mode of financing risk.Financing is a very important part of enterprise merger and acquisition plan, if improperly, it may have a financial risk, mainly has its own funds, stocks, bonds and other.On the other hand is the financing structure risk.Acquisition financing if the case of multiple channels, will face the financing structure, mainly including equity capital and debt capital in the capital structure, the long-term debt and short-term debt in the capital structure.To determine a reasonable financing structure shall maintain appropriate proportion of equity capital and debt capital, long-term debt capital and short-term debt capital reasonable collocation, and strive to minimize capital cost.
3 reverse merger risk.Under normal circumstances, the M & a business at a disadvantage.This will result in the merger and acquisition, the uncooperative attitude of mergers and acquisitions, because if the success of mergers and acquisitions, employee has threatened the vested interest, so they have to compete for control of the enterprise will try all means to block mergers, the M & A risks greatly increased.In 2009 July, equity adjustment Tonghua iron and steel group eventually because of employee dissent and termination.
The 4 major regulatory risk.This risk is governed by the professional regulations, make the M & a risk increases, the rising cost of M & A.If the provisions of China: the acquirer holds a listing Corporation 5% of the shares after the announcement and the suspension of trading must, after each increment 2% will repeat the process, holds 30% of the shares after the request to make a general offer.The acquisition cost is greatly increased, the risk increased, enough to make a takeover mergers abortion.
(three) the integration stage risk analysis
The McKinsey Co research shows: at least 6l% company was unable to recoup its investment in the merger of 3 years, and the main reason is the effect of the integration after M & A is not ideal.The M & A in M & A after the completion of integration of disadvantaged, unable to make the whole enterprise operating synergy, financial synergy, market share effect, amplifying the business risks and lead to the enterprise can not achieve the expected ear risk, we called the integrated risk enterprises, which includes three aspects of operational risk, integration risk and culture integrated risk.
1 operational risk.Operational risk is mainly manifested in: after the merger did not produce the expected financial synergy, the enterprise's financial ability is not improved, capital is not to achieve low cost effective allocation between the enterprise merger and acquisition of enterprises; after the merger, due to changes in the market, the target enterprise to supply and marketing channels scope changes, a shrinking share of the market; the new company after the merger due to too large scale and diseconomies of scale economic problems.
2 personnel integration risk.Enterprise merger is completed, if the enterprise cannot make out reasonable personnel policies, the rational use of the target enterprise talent, give full play to their talents, the target enterprise talent is lost, the even as rivals.At the same time redundancy of mergers and acquisitions business improper placement, will cause a series of social contradictions, affect the normal operation of enterprises merger and acquisition.
3 cultural integration risk.Two enterprise resources integration, structure widely and deeply, collision must touch the concept of corporate culture, as a result of incomplete information or regional differences, and may not be on after the merger of enterprises organizational culture to form correct consensus.According to statistics, in the global scope, merger and reorganization of the success rate of only about 43%, in the failure of M & A cases, more than 80% direct or indirect causes in the new enterprise culture integration failure.2O09 August, SAIC merger Ssangyong company filed for bankruptcy liquidation, this result is due in large part to the lack of consideration for South Korea, trade unions and other local culture.
The main risk two, China's M & a way around
(a) risk prevention preparation stage
1 to study the feasibility of M & A.In a clear basis of M & a purpose and direction, the size of the enterprise mergers and acquisitions, mergers and acquisitions, feasibility study after M & a market demand and economic benefits.And according to the development strategy of the enterprise comprehensive planning, comprehensive analysis of the target enterprise and industry environment, financial status and operation ability, focus on profitability and stability, the solvency of enterprises and its reliability and stability, capital structure, capital distribution and rationality, growth ability and persistence.
2 to formulate correct strategic M & A.The enterprise should make the target enterprise reasonable price range; determine the enterprise has the ability to control and manage the industry or company; determine the target enterprises must have the advantage of resources; to determine a wide to produce management, technology synergy based.
(two) the implementation of risk prevention stage
1 to establish a complete risk management mechanism.In order to establish a complete system of M & a risk warning, risk monitoring, risk assessment, risk control, risk prevention.Set up index system of financial analysis, financial warning model, analysis and management of asset quality for mergers and acquisitions, ensure cash liquidity, strengthen the capital management control.
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