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Analysis on the financial risk of M & A

Author: TangXiaoHua ChenYi From: www.yourpaper.net Posted: 2010-06-07 08:29:12 Read:
Keywords:   the merger of financial risk prevention measures;
Abstract: acquisition is an important means for enterprises to grow and expand, enterprises through mergers and acquisitions to gain more profit, but at the same time, M & A will face various risks, and all risks eventually are manifested in the financial risk.Enterprise merger plan existence financial risk decision-making, execution and operation of the integration of the three stage.Mainly includes the objective enterprise pricing risk, financing and payment risk, liquidity risk and solvency risk, merger and acquisition of enterprises should aim at the different stages of risk precaution.
The financial risk of M & A,
Enterprise merger risk according to its sources into industry risk, market risk, information risk, legal risk, policy risk, personnel risk, cultural risk and financial risk, and reflected in the enterprise's financial.Due to various risk results will be reflected in the financial information, so the financial risk is a kind of comprehensive risk, the ultimate form of enterprise merger and acquisition risk of foot.
Generally speaking, the financial risk of enterprise in debt and financing change guide to the enterprise's financial situation of uncertainty.The financial risk of the enterprise merger is the comprehensive reflection of various M & a risk in value, is caused by a financial decision-making behavior of pricing, financing and payment of enterprise financial deterioration or loss of uncertainty, is the M & a serious negative expected value and value realization deviation caused by the financial difficulties of enterprises and financial crisis.
two, the financial risk of M & A and reason analysis of each phase of the
1 the information asymmetry and the evaluation method of objective enterprise pricing too high due to improper.In the planning stage, the most important is the value assessment of the target enterprise, the acquisition of both information asymmetry, will lead to mergers and acquisitions of enterprises in a disadvantageous situation in valuation and pricing negotiations.The pricing of target enterprise is the core of M & a process, is fundamental to the success of mergers and acquisitions.The use of property, the pricing of target enterprise risk with the target enterprises mergers and acquisitions, mergers and acquisitions of both the attitude information access and pricing methods have great relations, but in the final analysis depends on the degree of information asymmetry in size.Since the merger of the asymmetric information, it may make mergers and acquisitions of enterprises encounter financial traps, effect of M & A financing arrangement and merger integration lead to financial and legal disputes, process.In addition, the enterprise value assessment methods usually include discounted cash flow method, book value, liquidation value method, washing rate method, EVA method and replacement cost method and so on, various methods have many subjective factors and defects.
Due to the information asymmetry and the value evaluation method of improper, will cause the value of the target enterprise is overestimated, enterprises have to pay huge cost.In 2008 July, China Merchants Securities to 6320000000 yuan (about $130) mergers Bosera Fund Management Limited company the equity of 48%, about 10 times the premium paid.Because of the boshijijin the valuation is not reasonable, let China Merchants Securities on the back of a huge debt burden.2 financing and payment risks.In the phase of the execution of the transaction, the companies decided to means of financing and payment, may face the financing risk and the risk of payment.Financing risk mainly refers to enterprises in the merger process due to the financing strategy arising from different sources of funds and M & a risk guarantee and relating to capital structure.Enterprise financing is internal financing, bond financing, credit financing, equity financing of four, how to make rational use of internal, external funding channels to raise funds in full and on time, is related to the enterprise merger and acquisition is the key to success.
Payment risk mainly refers to the enterprise merger and acquisition payment ability is insufficient and dilution of the risk of the use of funds, the risk and financing risk, debt is closely related to....Usually the payment methods including cash payment, stock payment, mixed payment, cash payment is a payment method widely used in enterprise merger and acquisition, but also for the enterprise fund raising way pressure maximum.Each kind of payment has its unique effect on the degree of risk, the cash flow of the enterprises and the future of the financing capacity is not the same, if the enterprise can't according to its business operations and financial condition of selection of financing and payment, it will bring great financial risks to the enterprise.Cash easily lead to corporate cash balance is insufficient, while the stock payment may make equity dilution, corporate earnings decline.TOM company has acquired both in cash and stock, the issue of new shares of the way, and the new price is much higher than buying when price of stocks, after large stock exceeds the lock-up period, to maintain the stock must be through the purchase, and "cash plus stock" buy the stocks facing increasing pressure to sell, the company in 2003 in the acquisition cycle, the risk the greater the plot.
3 liquidity risk and solvency risk.Liquidity risk is refers to the enterprise after the merger due to the heavy debt burden and the lack of short-term financing, led to the emergence of _ possibility of payment difficulties, debt risk is further reflected the liquidity risk.If the business after the acquisition of the debt burden can not guarantee the net cash flow stability and maturity of debt and reasonable structure, no further financial support, would have a chain reaction, resulting in enterprise assets face liquidity shortage, unable to repay the debt, and even bankruptcy.After the end of the two parties to the acquisition of M & A, each human, capital, finance, culture and other aspects are in need of a fusion process.Due to the impact of factors related to enterprise's management idea, financial institutions, financial operation mode, in the integration process inevitably there will be friction, the actual results and expected return may have very big difference, even from the entire enterprise business performance affected.BenQ Siemens 2005 acquisition of global mobile phone business after a year of huge loss of 800000000 euros, this and before and after the acquisition of Al Carter mobile phone business TCL has run in the same groove, because after the merger integration adverse predicament.
Financial risk three, mergers and acquisitions in the prevention of
1 prior to the analysis of the target enterprise value assessment and its ability to.To make merger decision, enterprises need to the market environment, policies and regulations, the target enterprise and our ability to have a comprehensive understanding, to gain the full information.Merger and acquisition of enterprises can be hired investment banks according to the development strategy of the enterprise comprehensive planning, conscientiously do a good job of due diligence, comprehensive analysis to capture target enterprises and of the target company's industry environment, financial status and operation ability, avoid the financial and legal pitfalls, which makes the evaluation results more close to the real value by a comprehensive method of valuation.Only the proper pricing of target enterprise, to ensure they won't in the negotiation process for overpaid funds led to excessive pressure.At the same time, enterprises should have a clear understanding of the strategic objectives, the scope of their business, financial strength, staffing and integrated management capabilities, fully prepared, truly know yourself as well as the enemy.2004 Ltd to acquire GF Securities it is because the GF "takeover" and the ultimate failure, but the key is lost in CITIC own inadequate preparation.In 2008, China Merchants Securities mergers Bosera funds become a laughing stock, is a concrete manifestation of merger and acquisition of enterprises to the goal enterprise valuation is not reasonable.
2 reasonable choice of means of financing and payment.The M & A financing mode and quantity of size and M & a payment, and the payment is due to the merger and acquisition of enterprises financing ability.The financing structure of private capital, debt capital and equity capital to maintain a proper proportion, but the selection of financing should also consider the preferred order.In the M & A, because the capital structure merger enterprise and target enterprise is different, will cause the differences of long-term capital and short-term capital, mergers and acquisitions required capital and debt capital investment ratio, so enterprises must consider its liquidity resources, price uncertainty, the ownership structure change and the target enterprise tax financing conditions, a reasonable choice of means of financing and payment of mergers and acquisitions, the payment arrangements into cash, debt and equity of the mixed payment mode to meet the different needs of l5Ij acquisition of both M & A activities, ensure smooth.In addition, enterprises can also choose the installment payment to alleviate the financial pressure, strengthen the management of working capital, reduce liquidity risk, provide good financial security for the enterprise.Large M & A in the subject transaction amount is huge, enterprises often need to select the comprehensive means of financing and payment.TOM company for acquisition of the repeated use of the "stock cash" in 2003 in a bid to make their own circle, risk accumulation and into a passive situation.In 2005, eBay acquired Skype's $4100000000 deal would choose the installment payment, successful completion of the acquisition, which first pay $1300000000 in cash and $1300000000 in stock, later to pay L5 million reward according to the performance of Skype company.
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