(A) tax avoidance factors
Because the tax rates of dividend income, interest income, operating income and capital income are quite different, appropriate financial treatment methods can realize reasonable tax avoidance in mergers and acquisitions. The deferred loss clause is stipulated in the tax law. Companies with large profits tend to target those with considerable accumulated losses, and tax revenue can increase the value of enterprises as an increase in cash inflows. The surplus of enterprise cash flow can be used in the following ways: issuing additional dividends, investing in securities, repurchasing stocks and acquiring other enterprises. If dividends are paid, the income tax paid by shareholders is higher than the securities transaction tax paid by mergers and acquisitions in the enterprise securities market; The yield of securities is not high; Buying back shares can easily improve the stock market and increase costs. The acquisition of enterprises with extra funds will produce certain tax benefits for enterprises and shareholders. In the acquisition of securities transactions. The acquisition company receives neither cash nor capital gains, so this process is tax-free. Through the flow and transfer of assets, enterprises enable asset owners to achieve the purpose of additional investment and asset diversification. M&A exchanges shares of the target enterprise by issuing convertible bonds, which are converted into shares after a period of time. In this way, the interest on issuing bonds can be deducted from the income first, and then the income tax can be calculated with the deducted surplus. On the other hand, enterprises can keep the capital gains of these bonds until they are converted into stocks, and the deferred payment of capital gains can make enterprises pay less capital gains tax.
(2) Financing
Merger and acquisition (M&A) of enterprises with large capital surplus but low stock market price can obtain their capital at the same time to make up for their capital shortage. Financing is a difficult problem faced by fast-growing enterprises, and trying to unite a well-funded enterprise is an effective solution. Because the replacement cost of assets is usually higher than its market price, enterprises are keen to acquire other enterprises rather than replace assets in mergers and acquisitions. Under the condition of efficient market, the economic value of enterprises is reflected by the market value based on the profitability of enterprises rather than the book value. The asset sale value of the merged enterprise is often low, the management efficiency of the enterprise is improved after the merger, and the related expenses are reduced by the reorganization of functional departments, which are all favorable conditions for M&A financing. At present, many state-owned enterprises urgently need a lot of development funds to implement technological transformation, so they adopt the form of property rights flow, reorganize their assets in different ways, revitalize their stocks to reduce investment and quickly form new productive forces. For example, Shanghai Industrial Holdings Co., Ltd., registered and listed in Hong Kong, invested 60 million yuan to acquire Shanghai Fei Xia Daily Chemical Company, which explored a new way for China enterprises to indirectly develop domestic brands by using foreign capital. Although Fei Xia has the advantages of well-known trademarks, its development is still slow due to lack of funds. After the merger, the company will be registered in Hong Kong as a way of overseas financing.
(C) Value-added enterprises
Under normal circumstances, the P/E ratio of the stock of the acquired enterprise is lower than that of the acquirer, which makes the P/E ratio remain at a high level after the merger. The rise of share price has improved earnings per share and increased the wealth value of shareholders. Therefore, after M&A, the absolute scale and relative scale of the enterprise have been expanded, and the ability to control the cost and price, production technology, sources of funds and customers' purchasing behavior has been enhanced, which can reduce the risk of the enterprise and improve the safety level and total profit of the enterprise in the case of sudden market changes. At the same time, the credit rating of enterprises rises and the financing cost falls, which is reflected in the securities market, making the stock prices of both parties to the transaction rise and the enterprise value increase, resulting in financial expectation effect.
Enter the capital market
The reform of China's financial system and the strengthening of international economic integration have greatly expanded the channels of financing from the securities market and the international financial market. Many companies with good performance often invest in the direction of capital operation and seek mergers and acquisitions in order to strengthen their own strength.
(5) speculation
Unproductive income from securities trading, accounting treatment and tax treatment of enterprise merger and acquisition can improve the financial situation of enterprises and encourage speculation at the same time. Speculation is increasing in China's foreign mergers and acquisitions. They buy the equity of the target company through a large amount of debt in the stock market, then sell some assets, and then rectify the target company and sell it at a high price, making full use of the undervalued assets to obtain the income from mergers and acquisitions.
(vi) Expected financial effect
Because the stock market has changed the evaluation of enterprise stocks in the process of mergers and acquisitions, thus affecting stock prices and becoming the basis of stock speculation, thus promoting mergers and acquisitions. Generally, the stock price will not change much in a short time. Only when the P/E ratio or profit growth rate of an enterprise is greatly improved will the price-income ratio be improved. However, once there is a merger, the market's evaluation of the company will lead to an increase in the share prices of both parties. Enterprises can improve their earnings per share by merging enterprises with lower P/E ratio but higher earnings per share, so as to keep the share price rising. In the M&A craze in the United States, the expected effect makes M&A often accompanied by speculation and sharp fluctuations in stock prices.
(7) Pursuing profit
The realization of enterprise profits depends on the market. Only when the goods and services provided by enterprises are accepted by customers in the market and converted into money can profits be truly realized. What is associated with profit maximization must be the maximization of market share of enterprises with market maximization. Due to the development of internationalization of production, market and capital, the market of some industries is expanding day by day, so enterprises in these industries should be merged to meet the challenge of international open market.
Legal elements of merger and acquisition of limited liability companies;
Chapter VII of the Company Law specifically provides for the merger and division of companies, and the provisions of this chapter and the relevant provisions of the share/share transfer in this law constitute the basic legal framework for company mergers and acquisitions in China. To sum up, its main contents include the following clauses: company merger agreement and its effective conditions, company debt notification/announcement procedures, dissolution and liquidation procedures of the target company or the merged company, asset transfer and company establishment/change registration procedures.
In essence, company merger and acquisition is a civil legal act of paid transfer of enterprise property rights, which is generally based on a valid contract between the two parties. Paragraph 3 of Article 172 of the Company Law stipulates that the merger agreement shall be signed by all parties to the merger. Article 179 of the Company Law stipulates that the merger or division of a company shall be decided by the shareholders' meeting. Therefore, the merger of companies should take the form of a written contract, and one of the effective conditions of the merger contract is that the shareholders' meeting and the board of directors agree to the merger in the form of a written resolution.
After the merger contract is approved by the shareholders' meeting of the merging parties, the merging parties shall also perform the obligation of debt notification. In general, the notice sent to the creditor shall include the way of debt commitment, and the creditor has the right to ask the merged party to pay off the debt or provide corresponding guarantee. If the parties to the merger fail to fulfill the obligation of debt notification, outstanding debts or provide corresponding guarantees, the merger and acquisition of the company cannot be completed.
Company merger can take two forms: absorption merger and new merger. In the form of attracting merger, the legal person qualification of the merged target company disappears, and it is necessary to go through the formalities of cancellation and dissolution of the company; If a new merger method is adopted, the legal person status of the merged parties will disappear, and the dissolution and asset liquidation procedures of the merged companies are required, and at the same time, the establishment procedures of the newly established companies after the merger are required.
After the merger, the parties to the merger should also go through the relevant legal procedures, such as the transfer of property rights, the change of shareholder status, the increase or decrease of the company's registered capital, the change of the company's business scope, etc. In addition, after the merger, the company should go through the tax registration formalities again, and the financial statements of the merged enterprise should be recognized by the tax authorities.
Merger is one of the ways of company merger and acquisition, and the other way is to control the target company by controlling its equity. The applicable legal provisions of this kind of company merger and acquisition are the relevant rules of company equity transfer and capital increase. In the case of merger and acquisition by means of equity transfer, at least the consent of the shareholders of the target company and the resolution of the board of directors shall be obtained, and after the equity transfer, the shareholder change registration shall also be handled; Merger and acquisition of new shares, shall handle the registration of change of registered capital and shareholders. No matter what form of equity merger and acquisition is adopted, if the registered information of the legal representative or other companies changes, the relevant change procedures shall be handled.
legal ground
Company Law of the People's Republic of China
Article 172 The merger of companies may take the form of absorption merger or new merger.
A company absorbs other companies for merger, and the absorbed company is dissolved. The merger of two or more companies to form a new company is a new merger, and the parties to the merger are dissolved.
Article 179 Where a company is merged or divided and its registered items change, it shall register the change with the company registration authority according to law; If the company is dissolved, it shall go through the cancellation of registration according to law; Where a new company is established, it shall be registered in accordance with the law.
Where a company increases or decreases its registered capital, it shall register the change with the company registration authority according to law.