Discussion on Financial Analysis of Mergers and Acquisitions

Paper Keywords: Cost-benefit analysis of mergers and acquisitions
Abstract: Mergers and Acquisitions is a modern enterprise system development to a certain stage of the product. China's enterprises for various reasons, M & A late start, the process of financial risk in M ​​& A become the focus of most attention. Financial risk throughout the entire M & A activity has and directly determines the success of mergers and acquisitions. M & A act as an investment, the objective is to seek to maximize profits, earnings per share to maximize enterprise value maximization. Therefore, when mergers and acquisitions, not only the first of value of the acquired companies to assess appropriate methods, but also should be conducted M & A financial analysis, including cost analysis and benefit analysis.

Competition in the market, the company's success or failure often occur in combination, idle and lack of social resources, the mechanism of survival of the fittest so that those who developed rapidly to the urgent need to expand the production scale through mergers and acquisitions of companies operating difficulties of the company's idle factor of production. Part of our country poor business, competitive, and some almost bankrupt, the objective to provide a possible merger. Meanwhile, more than 100 years in developed countries compared to the history of mergers and acquisitions, mergers and acquisitions in China's development is only a short period of ten years, regardless of in size or quality exists a big gap. the scale of the shortfall is due to generally smaller scale of business; the gap in quality is mainly due to China's enterprises on issues related to the merger does not make the right judgments, M & A not ideal. With the dominant position of the enterprise market increasing awareness of domestic and foreign enterprises of strategic mergers and acquisitions occur frequently, the number of mergers and acquisitions, and gradually expand the scale, the effective acquisition of the financial activities increased efficiency can make a considerable portion of our country enterprises through mergers and acquisitions to enhance economic efficiency, to rapid development.

First, the acquisition of the meaning and motivation
M & A transactions of property rights made by a company other companies a degree of control to achieve certain economic goals of the kind of economic behavior, which includes mergers and acquisitions double meaning. That merger took place between the two companies . M & A refers to a company in cash, bonds, stocks or other securities, through the acquisition of debt, direct investment, holding and other various means, to buy the stock or assets of other companies, other corporate assets to obtain the actual control of it lost its legal personality or has control of behavior. to its essence, is the re-allocation of rights among enterprises and the combination process. From a financial point of view, M & A business is an investment behavior. M The financial problem is Kaishi from the investment decision-making to the investment returns of the investment behavior of the inspection process Weizhi financial sense of control. the direct purpose of M & M party in order to obtain a certain number of the acquired business property rights and the main control, or All property rights and full control. M & A is the result of market competition, enterprise capital operation is an important way to achieve enterprise resource optimization, adjustment of industrial structure, upgrade an important way. Shanxi Province in recent years, large state-owned coal mines to carry out high-profile the resources of local small coal mines is through the merger integration integration of the local small coal resources to ensure that large state-owned coal mines in Shanxi Province healthy and orderly and sustainable development. promote the integration and compensation for the use of coal resources, the work is to enhance the level of the overall development of Shanxi Province , the coal enterprises of industry concentration and security an important way, the full implementation of compensation for the use of coal resources or capital management is an important mineral resources, state laws reflected.

Second, the cost of purchased businesses well
In the process of mergers and acquisitions, M & A costs include: preparation before the implementation of the cost of acquisition of the target company's purchase cost and the cost of post-merger integration. Purchase cost is only part of the cost of acquisition, most of the preparation costs of mergers and acquisitions, the purchase cost looks low, but the total cost is actually very high. in M ​​& M caused the failure of some enterprises, mainly because these companies to focus so much preparation before merger costs and purchase costs after the merger integration costs of lack of knowledge.

(A) the preparation before the implementation of the cost of acquisition
Refers to the enterprises in pre-merger, first of all the basic information on M & A business investigation and analysis of its production, operation, management, technical, financial condition and other aspects of feasibility studies, the costs of mergers and acquisitions, revenue, risk, pricing Research to determine the feasibility of M & As. In this process occurred in a variety of direct and indirect costs, including start-up costs, Research and development expenses, consulting fees related costs. for the cost of M & A an important part of the cost.

(B) of the purchase cost
In determining the objectives of an enterprise after the merger, M & A business to target company shareholders in cash, stock and other payment methods for its control, including the payment to former shareholders of target companies the cost and commitment to the objectives of corporate debt. Consider purchasing costs while full account of mergers and acquisitions benefit.

(C) integration costs
Coordination costs also known as M & A refers to the enterprise to enable the enterprise to be launched as planned, the development of the investment needed for the production. In get control of the target company, M & A business enterprise must consider the long-term goals development strategies and integration and to pay operating costs. on M & A business and target company to conduct a comprehensive, system integration, the integration process is successful is directly related to the success of the merger. When the merger is completed, the acquisition of enterprise and the enterprise to be as two different enterprises in business, management, corporate culture, there are significant differences. to make them into a business, in the integration process, companies must constantly adjust the various resources and elements to make the acquisition of enterprises and objectives of the companies to integrate. in the integration process is completed, the need to inject liquidity into the new venture for new business development for advertising fees, service fees. in M ​​& A process, there are two costs to consider: One is the exit costs, and the other is the opportunity cost. exit costs primarily refers to the implementation of expansion through the acquisition of the expansion is not successful there must be out, or when the enterprise in which the emergence of adverse changes in the competitive environment, mergers and acquisitions need to lift some or all of what happened costs. In general, the greater the intensity of mergers and acquisitions, the exit may occur the higher the cost. This is a cost or a cost, not necessarily happen, but companies should take into account the cost to the M & A process M & A strategy to make more appropriate arrangements or adjustments. integration cost ratio is reasonable, the success or failure of mergers and acquisitions is important. reposted elsewhere in the Research Papers Download http://www.hi138.com Third, the benefits of mergers and acquisitions
Mergers and acquisitions as an important capital management activities, its purpose is to seek maximum capital appreciation and reduce the pressure of competition. As the costs and benefits are closely related, so the cost analysis of mergers and acquisitions while the potential benefits of M & A were analyzed. enterprise merger and acquisition decision making, its possible benefits must be comprehensive, full estimates of costs and benefits of mergers and acquisitions the right decision is directly related to business success or failure.

(A) the economic benefits of scale
Mergers and acquisitions businesses need access to the property and assets, the implementation of integrated operations to achieve economies of scale, achieved large group effectiveness. Where economies of scale, economies of scale and enterprises including the production of two-level economies of scale, economies of scale due to some sort of inseparability exist. through acquisitions, the existing physical assets can be shared in a wider range and lower costs; corporate Research and development costs, marketing costs can be allocated to invest a lot of output, so that will help significant savings in resources, production and live full value of labor, reduce unit costs, increase revenue unit of input to achieve specialization and cooperation, and improving overall efficiency.

(B) obtain the tax effect
Loss of deferred tax provisions included to allow loss-making enterprises exempt from income tax year, and the losses can be deferred back to offset earnings in subsequent years. Meanwhile, the provisions of tax laws, different assets have different tax rates apply to income, dividend income , interest income, operating income, capital gains tax rate is also different. enterprises can take advantage of these provisions, through the appropriate financial processing M & A reasonable tax avoidance. If the business in the year, a serious loss, or business is not profitable for several years , the enterprise has accumulated a considerable number of losses, the firm will often be considered as acquisition targets or merger of the companies consider profit-making enterprises, in order to fully benefit its tax advantages.

(C) gain access to financing sources
Access to financing benefits. The reason why some companies or financial institutions mergers and acquisitions of listed companies, mainly to find a more convenient for their financing channels. Non-listed companies have been acquired through the stock market listed company, and then to the reverse acquisition method of injection own the business and assets to achieve the purpose of indirect public. strengths enterprises through the "backdoor listing" can use the "shell" companies in the allotment and issuance of new shares to raise funds more convenient. In addition, enterprises can take advantage of a large group after the merger integration advantages of credit guarantee, loan capital from the financial institution to promote a strong business development.

(D) the formation of internal resources to complement
Enterprises through mergers and acquisitions, has not only been the original company's assets can also share existing enterprise management personnel with advanced experience, a favorable competitive advantage. In addition, the enterprises through mergers and acquisitions can be in technology, markets, products, management, and even in the enterprise cultural aspects of each other, to achieve complementary effects.

(E) to reduce or spread risk,
After the merger because of its size and strength have shown a strong competitive edge, and may to some extent on the market with the formation of a significant impact on the development of the industry, so there is likely to seek new areas of investment and future development , in the event of financial crises can spread the risks of operating in a single product.

In short, corporate mergers and acquisitions to a correct understanding of the significance for their own development, especially in the current global economy and countries in the world is facing a major financial crisis under the influence, the correct analysis of the economic situation of their own enterprises, to seize the opportunity, within our capabilities make your own business can be healthy and efficient manner. reposted elsewhere in the Research Papers Download http://www.hi138.com