In order to achieve the purpose of analyzing and controlling the financial risks of overseas M&A in China, this paper analyzes and studies the financial risks in the process of overseas M&A from the perspective of game theory on the basis of drawing lessons from domestic and foreign research. The results show that the evaluation of M&A enterprise value is an incomplete information game process, and the merged enterprise should make a reasonable M&A quotation according to the actual operating performance to make M&A go smoothly.
Keywords: game theory; Financial risk; Overseas mergers and acquisitions
introduce
With the acceleration of global economic integration, cross-border mergers and acquisitions have become a common economic behavior in the process of enterprise development. On the one hand, following the strategy of "bringing in", China advocates the economic development strategy of "going out". In recent years, China government has formulated a series of policies to support China enterprises' overseas investment, so that China enterprises can carry out overseas mergers and acquisitions more smoothly. On the other hand, due to the economic slowdown in the United States and Europe, China, as one of the BRIC countries, enjoys a strong economic development momentum. The international competitiveness of China enterprises is getting stronger and stronger, and the development of the world economy needs the participation of China enterprises. Overseas M&A, as a development strategy for enterprises to quickly gain market share and superior resources, is favored by domestic enterprises. By the end of the first half of 20 14, the overseas M&A amount of China enterprises reached $37.81900 million, up by 21/0.3% year-on-year. However, not all mergers and acquisitions have achieved the strategic goals of enterprises. In a sense, more than half of mergers and acquisitions have ended in failure.
As one of the most important risks in the process of M&A, financial risk runs through the whole process of M&A activities. All financial management activities such as investment, fund-raising and distribution of enterprises need to identify, evaluate and control financial risks. For overseas mergers and acquisitions, it is more difficult to manage financial risks because of information asymmetry and differences between different countries. When many scholars at home and abroad study the risks of overseas M&A, most of them are based on the overall risk framework or a single case study, without in-depth study of each risk. When studying the risks of overseas M&A, this paper pays more attention to the identification, measurement and control of financial risks. For the financial risks of financial pricing, this paper analyzes the financial risks from the perspective of game theory, trying to explain the financial risks from a new perspective and provide a new tool for enterprises to analyze financial risks in M&A practice.
1. Literature review and theoretical framework of this paper.
Hooke (2000) pointed out that the main reason of financial risk is the weakening of M&A's repayment ability after financing. Du Xiaojun and Liu He (20 12) believe that financial risks mainly come from financing, payment and pricing in enterprise mergers and acquisitions. Zhao (20 12) pointed out that the change of enterprise capital structure caused by financing is the main reason of enterprise financial risk. Quan (20 14) pointed out in the article that the main reasons for financial risks are: insufficient cash flow and excessive debt burden.
In order to control the financial risk of M&A, some foreign scholars suggest that the size and degree of financial risk should be calculated and predicted according to the public financial data of the merged enterprises. In order to reduce the mistakes in the evaluation of the value of the acquired enterprises, foreign scholars suggest that the way of share exchange payment can be used to reduce the financial risks in mergers and acquisitions. Many foreign scholars also use statistical models to predict financial risks and put forward countermeasures and suggestions. Chen * * * Rong (2002), a domestic scholar, pointed out that solving the problem of information asymmetry is fundamental to controlling financial risks. Li Deping (2005) pointed out that the most fundamental way to avoid financial risks is to keep the steady growth of cash flow after mergers and acquisitions. Tang (2008) put forward the control of financial risk through the analysis of financial risk, including the previous value evaluation, the choice of consideration financing mode and payment mode in M&A. Zhou Lulu and others (20 12) think that the reorganization and integration after M&A is very important, and the decision makers in M&A activities must take corresponding measures to reduce the financial risk as much as possible. Yuan, (20 13) Based on the overall risk framework research, financial risk control is divided into cash flow adequacy control, rate of return guarantee and solvency guarantee.
In 1970s, three American economists put forward the theory of information asymmetry. However, in overseas mergers and acquisitions, information asymmetry is more obvious, and the merged enterprises are in different countries, so it is more difficult to solve this problem. Game theory refers to the theory that two or more subjects interact in decision-making and make the best decision under the condition of satisfying their own interests. Both overseas M&A parties can be regarded as game subjects, and all kinds of behaviors in the process of M&A can be regarded as strategies or behaviors of both parties. Both sides of merger and acquisition aim at maximizing their own interests, and the decision of one side will affect the strategic choice of the other.
It can be seen that although it is difficult to evaluate and control risks in the whole process of overseas M&A due to information asymmetry, game theory can be used to analyze and help M&A enterprises reduce and control risks.
Two. Types of financial risks in overseas mergers and acquisitions
Based on the research of scholars at home and abroad, when analyzing financial risks, this paper adopts common classification methods to divide financial risks into valuation risks of target enterprises, selection risks of financing and payment methods, and financial integration risks after mergers and acquisitions. It can be seen that the first step to identify and control the financial risks of overseas mergers and acquisitions is to identify the true value of the acquired enterprises and estimate them correctly.
Thirdly, the value evaluation of the merged enterprise based on game theory.
3. 1 M&A process based on game theory
In offshore mergers and acquisitions, the acquired party knows its own enterprise better than the acquirer, so the acquirer is generally the receiver of the signal in the game, and the acquired party is the sender of the signal. The information asymmetry between the two parties to the M&A enterprise leads to the existence of the game in the whole M&A process.
Overseas M&A is a process in which both parties negotiate and reach an agreement many times. Due to the transmission of information, the behavior of the first actor will have an impact on the behavior choice of the last actor in the whole process. Therefore, M&A process is regarded as a dynamic game process with incomplete information.
In the dynamic game with incomplete information, the two parties participating in M&A are two participants in the game, one of whom acts first, and the result of his action will be transmitted as a signal to the participants who act later. No matter which party moves first, when choosing a strategy, it is based on the best self-interest of both parties under various information, and will consider the other party's choice of strategy. After receiving the signal, the post-actors analyze and adjust their strategic choices. Then cycle the game process until both parties reach an agreement.
3.2 Value Assessment Hypothesis Based on Game Theory
According to the strategic plan of its own enterprise development, the acquirer analyzes the relevant information disclosed by the enterprise to be acquired and puts forward the requirements for merger and acquisition. When the acquirer analyzes the disclosed information, whether the information is true and effective, whether the market transmission is sufficient and whether the analysis is reasonable will affect the judgment of the acquirer. In the process of M&A, information is constantly disclosed, and the acquirer constantly improves the M&A valuation parameters, finally obtains relevant parameters and selects a certain evaluation model to evaluate its value.