1. Information asymmetry risk means that there may be serious information asymmetry between the company's understanding of the acquirer and the shareholders and management of the target company in the process of mergers and acquisitions.
2. Decision risk refers to the directional error when the acquirer makes the acquisition strategic decision.
3. Implementation risk refers to the specific operation in the process of M&A and the risks faced in the final system integration. In addition, there are many potential crises in the enterprise, such as operating risk, financing risk, anti-takeover risk, employee placement risk of the acquired enterprise and false assets risk.
Second, M&A process and risk analysis
The process of M&A can generally be divided into preparation stage, negotiation stage and signing closing stage.
(1) Preparatory stage
1. Explain the motivation and purpose of M&A. Enterprises should first make clear why they want to make mergers and acquisitions, and what is the purpose of mergers and acquisitions. Generally speaking, the motives of M&A are market share, crowding out competitors, improving profit margins, acquiring brands and sales channels. Enterprises should combine their own structural capabilities, including the formation of internal acquisition teams and the analysis of their own strategic operational financial capabilities, measure the future development trends, business opportunities and risks of the company and its industries, and determine which activities can bring added value to enterprise transactions.
2. Formulate M&A strategy. When making M&A strategy, it is necessary to choose the industry and products of the target company, the country where the target company is located and the scale of the target company. Once the right opportunity is found, the enterprise should evaluate the possibility of M&A and the solution to avoid risks by using market advantages, and make a comprehensive analysis of the sales market and industrial development prospects of the target company's products, and plan a general M&A plan.
3. Establish an internal M&A team. The internal M&A team should be composed of company leaders and relevant department leaders. M&A team should be familiar with the knowledge of law, accounting and finance involved in the evaluation process to ensure quick response, smooth decision-making and external liaison.
4. Select the general counsel of M&A Investment Company. Once the target of M&A is selected, it is necessary to use different methods to evaluate the value of the target enterprise. Because if the purchase price is too high, the return on investment of shareholders will be affected. Generally, a well-known consulting company, accounting company or law firm is chosen as the general counsel of M&A investment. If it is a large multinational M&A, it is necessary to hire an investment bank as the general counsel of M&A. ..
(2) negotiation stage
1, looking for the target company.
2. Screen the target companies and select the ideal 2-3 companies.
3. Understand the background of shareholders of the target company, the distribution of equity and other issues, and issue a formal negotiation invitation to the target company. In the process of understanding, we should compare it with the previous understanding of the company to see if there is any error. This part is prone to information asymmetry. If there is a big error with the previous understanding, we must re-formulate the strategic plan to see whether it really suits the development of our company and whether it can maximize the shareholder value.
4. Hire tax and audit consultants and lawyers to participate in negotiations with the target company. Tax, audit consultants and lawyers can comprehensively analyze the operating conditions of the target company and estimate the asset value, thus protecting the interests of their own companies. In the case of Geely's acquisition of Volvo, Geely began to contact Volvo in 2007, and began to recruit China auto industry elites to form a team, from auditors to M&A sales talents, constantly learning the knowledge of M&A, which laid the foundation for Geely's acquisition of Volvo. Through more than ten expert meetings and on-the-spot observation at Volvo, Ford drafted more than 2,000 pages of contracts, made many revisions and comments, and finally fully grasped the situation.
5. Sign a letter of intent for M&A. The contents of the letter of intent include the intention of merger and acquisition, informal quotation, confidentiality obligation and exclusivity. The general letter of intent has no legal effect, but the confidentiality clause has legal effect. All participants in the negotiation should abide by trade secrets to ensure that even if the merger is unsuccessful, the intention of the acquirer will not be known to the outside world too early, and the interests of the target company can be safeguarded.
6. Make business integration plan for the target enterprise after the merger. The integration plan includes the ownership structure, investment scale, business policy, financing mode and personnel arrangement of the target company after the merger. The integration plan is the key factor to win government guarantees and loans from commercial banks. The new company should have a clear long-term plan recognized by both parties. A detailed plan should be made as soon as possible. The integration plan is related to the smooth implementation of the merger and the smooth operation of the two enterprises after the merger. There will be implementation risks in the process of integration, which is also the most important link in the whole M&A process. Take Haier's acquisition of Mattel as an example. If Haier acquires Mattel, it will face the problem of promoting two major brands in the United States and inject funds into promoting Mattel brands. Integrating Mattel is actually equivalent to restructuring. Like a jigsaw puzzle, it's all pieces that need to be pieced together. While promoting brands, we should not only integrate Mattel, but also pay attention to our own brand Haier. In addition, while promoting the brand, it needs continuous capital injection. There are still many powerful competitors in the market. In an economic power like the United States, the daily economic transaction volume is very large, and every step should be very cautious. Every decision will have an impact on both companies. If Haier blindly invests in Mattel, if the integration fails, not only Mattel, but even Haier may declare bankruptcy, so in the absence of a complete solution, it is actually a good choice for Haier to abandon the integration of Mattel.
7. Conduct due diligence. From the aspects of finance, law, technology, taxation, system control, contracts, pensions, intellectual property rights, etc., the assets evaluation and financial review of the target company are carried out to understand the real situation of the debt structure, repayment ability, profit sources and prospects of the target company and reduce the risk of mergers and acquisitions. Before starting due diligence, you should prepare a list of questions for the target company and negotiate the time for entering the reference room and field trip.
8. Negotiate with the shareholders of the target company, discuss the due diligence report and draft the M&A agreement. When drafting the M&A Agreement, we should proceed from the actual situation of our company, and comprehensively analyze and draft the M&A Agreement according to the situation we have, the problems that may be involved in the future and the current macroeconomic situation.
(3) Signing and closing stage. After the buyer and the seller reach an agreement on the M&A contract, they can arrange the signing time and place of the contract. The text of the merger and acquisition contract of a limited liability company shall be notarized by a notary organ.
The M&A contract should clearly specify the procedures for asset transfer. Generally, the buyer will remit the contract money to the notary's account first, and then notify the notary to pay after all the assets and documents have been counted, and transfer the assets to the buyer's name. At this point, the merger officially ended.
Three. Analysis of other risk factors
(1) Political factors. China is a socialist system, with public ownership as the main part of the economic system and multiple ownership economies developing together. This economic system makes many enterprises in our country state-owned. In the process of mergers and acquisitions, there will be obstacles when it comes to mergers and acquisitions with foreign enterprises. In the case of Haier's acquisition of Mattel, although Haier is currently private, it is still controlled by the state. In various media, Haier is described as a dangerous foreign predator, eager to snatch valuable assets from American buyers. The merger of PetroChina, which happened at the same time as the merger of Haier, was also considered as a political factor, which became another reason for the failure of the acquisition. Political issues are a sensitive topic in every country. No matter what it is, once it comes to politics, it will become very cautious. Today, Haier is still in the hands of the state. Therefore, the hasty acquisition of Mattel will inevitably cause repercussions in the United States and make the American economic market unstable. The United States has always been the number one power in the world, and China's comprehensive national strength has improved significantly since 2 1 century. No matter from the political aspect or Sino-US relations, Haier's acquisition of Mattel is indeed.
(2) Cultural factors. Taking transnational M&A as an example, China enterprises often face double differences and conflicts between national culture and corporate culture in the process of M&A with foreign enterprises. Between the two countries, China seems to be facing a bigger problem, and has made remarkable achievements in its past operations, forming a relatively stable corporate culture. This corporate culture is deeply rooted in the psychology of top managers and is difficult to change. It is easy to apply the management model adopted in the past to the acquired enterprises. In the west, the merged enterprises usually have a long history and a mature enterprise environment. They have a high degree of cultural identification with themselves and a strong sense of racial superiority, but generally have a low degree of corporate cultural identification with China. In the acquisition of Mattel by Haier, when asked how to contact the management of Haier, the spokesman of Haier USA only left a sentence "I don't know" and nothing else. It was Haier who refused an interview with DesMoinesRegister (the local media in Mattel's state), thus sending a negative signal to the local people. This move caused dissatisfaction among local workers in Mattel. Trade unions are a force to be reckoned with in cross-border acquisitions. Without the support of trade unions, Haier's bid has been struggling. The lack of timely communication with Mattel employees is also a factor of cultural differences. If they don't understand your handling method, they will naturally have scruples and lead to the failure of the merger.