The cost of enterprise merger and acquisition refers to the sum of a series of expenses incurred by the enterprise due to merger and acquisition, including not only the cost of purchasing the target enterprise and the integrated management cost after merger and acquisition, but also the opportunity cost (that is, the income obtained by the enterprise from giving up other investments for merger and acquisition). According to whether the expenses incurred in M&A are paid directly to the target enterprise, the cost of M&A can be divided into direct cost and indirect cost.
Direct cost refers to the acquisition cost paid directly by the acquirer to the target enterprise, that is, the purchase price, which consists of the fair value of the net assets of the target enterprise and the goodwill confirmed by accounting, and the latter consists of the self-created goodwill of the target enterprise and the co-created goodwill distributed to the target enterprise. The purchase price is the most important part of M&A cost, so whether the purchase price is appropriate is related to the success or failure of M&A. In addition, the payment method of direct cost is also related to the profitability of M&A. This cost can be paid in cash, bonds, stocks or other forms.
Indirect cost refers to the expenses that are not directly paid to M&A enterprises, but need to be paid in the process of M&A ... Specifically, it includes the following expenses:
One is the information cost? The cost of obtaining information such as financial status, operating status and environmental status of the target enterprise and M&A enterprise.
The second is the cost of intermediaries (such as asset appraisal institutions) and experts (such as legal consultation and financial consultation).
The third is the communication cost? The communication cost with various stakeholders such as the target enterprise and the government in the process of merger and acquisition.
The fourth is the negotiation cost? The cost of negotiating with the target enterprise on a series of issues such as M&A price and M&A responsibility.
The fifth is the integration cost? The cost of integrating the target enterprise after M&A enterprise obtains the control right of the target enterprise. The sixth is the management cost after integration.
Second, the factors affecting the cost of mergers and acquisitions
The cost of M&A not only affects the income of M&A, but also affects the success rate of M&A. Therefore, paying attention to the influencing factors of M&A cost is the premise of strengthening M&A cost control.
(A) the influencing factors of direct costs
1. Information asymmetry.
The annual report, stock price change statement and financial statement of the target enterprise are often the important basis for determining the merger price, but the target enterprise may "package" according to the principle of benefiting its own interests, which will lead to the increase of acquisition cost.
2. The fair value of the net assets of the target enterprise.
The fair value of the net assets of the target enterprise is a component of the direct cost, and the assets and liabilities of the target enterprise determine the fair value of its net assets. Therefore, overestimating the assets of the target enterprise or underestimating the liabilities of the target enterprise will lead to the increase of the fair value of the net assets of the target enterprise, which will lead to the increase of the acquisition cost. Of course, the liabilities here are not just contingent liabilities. For example, if the interest part is ignored when confirming the liabilities of the target enterprise, the actual liabilities will be higher than the confirmed amount.
3. Merger and acquisition of goodwill.
M&A goodwill is another component of direct cost, which includes not only the goodwill created by the target enterprise, but also the co-creation goodwill allocated to the target enterprise. Co-creation of goodwill is jointly created by both parties to the merger, which is numerically equal to the part where the equity value of the enterprise after the merger exceeds the sum of the equity values of both parties before the merger, that is, the added value of the merger. Therefore, the overestimation of self-created goodwill or the improvement of co-created goodwill will lead to the increase of direct costs.
4. Evaluation agency.
The final determination of the purchase price of the target enterprise is largely based on the evaluation of the value of the target enterprise by the evaluation agency. Judging from the procedure of asset inventory, it is impossible for an appraisal institution to conduct a thorough inventory of the target enterprise in a limited time, and it can only take the form of sampling, which will lead to certain differences between the appraisal results of some assets and the actual situation.
In addition, the personnel quality of the same appraisal institution is different, and the overall personnel quality of different appraisal institutions is different, so different appraisers will abide by professional ethics and judge things differently. Therefore, different evaluation agencies may get different results when evaluating the same target enterprise. When the evaluation result of the target enterprise's value is higher than its actual value, the acquisition cost will undoubtedly increase.
5. Evaluation criteria and methods.
The methods of asset appraisal mainly include book value method, liquidation value method, replacement value method, fair value method, market value method, current market price method, P/E ratio model method and cash flow discount method. Different evaluation standards and methods will have different judgment standards and emphasis on the evaluation of the value of the target enterprise, which will have a great impact on the purchase price of the target enterprise.
(B) Influencing factors of indirect costs
1.M&A Enterprise's own financial strength.
M&A needs a lot of capital, besides its own capital, it usually needs to raise funds from outside. However, if enterprises rely too much on foreign capital, it will inevitably increase their debt burden, which will lead to the increase of M&A costs. After M&A, it needs a lot of money to inject high-quality assets into the target company, allocate start-up funds or start-up expenses, and pay research fees, advertising fees, network setup fees, corporate culture integration fees, etc. for opening the market for new enterprises. Having a good financial position and operational integration ability will reduce the cost of mergers and acquisitions; On the contrary, it will increase the cost of post-merger management integration.
2. Financing methods.
Few enterprises can completely rely on their own funds to complete mergers and acquisitions, and generally need to raise funds from outside. There are many ways to raise funds. Enterprises can borrow short-term or long-term money from banks. They can also raise funds by issuing bonds and stocks, but the cost of each method is different. Generally speaking, the order of financing cost is: stock > bond > long-term loan >; Short-term borrowing. Income is directly proportional to risk, and the higher the income, the greater the risk. For investors, investing in stocks is the most risky, but it can also get higher returns, and enterprises have to pay higher costs.
3.M&A method.
There are three ways of M&A, namely horizontal M&A, vertical M&A and mixed M&A. Horizontal M&A refers to the M&A between commercial competitors. It is an M&A between two or more enterprises that produce or sell the same or similar products. The overall purpose is to eliminate competition, expand scale, expand market share and improve the competitive strength of M&A enterprises. This is a shortcut for enterprises to achieve rapid growth.
Vertical M&A refers to the formation of a production system from primary raw materials to final products through the merger of upstream and downstream enterprises. It is a merger between enterprises with vertically related economic and technological relations, which can be carried out between different production links or in different business fields.
Mixed mergers and acquisitions, also known as diversified mergers and acquisitions, are mergers and acquisitions of enterprise resources in different industrial fields. Their products belong to different markets, and their industrial departments have no special production and technical ties. Its purpose is to reduce the risks brought by operating an industry. This merger and acquisition method has always been an option for large enterprises to integrate resources.
Different M&A methods have different effects on M&A cost. Generally speaking, horizontal M&A brings M&A effect to enterprises, while the integration cost of human resources is relatively high. Vertical M&A not only saves operating costs for enterprises, but also increases management costs with the increase of process length.
4. Talent status of M&A enterprises.
M&A involves many financial and legal issues. If M&A enterprises don't have high-level professionals in these fields, they need to be hired, which will lead to a lot of consulting fees.
Third, methods and measures to control the cost of mergers and acquisitions
(A) direct cost control methods and measures
1. Strengthen the ability of information investigation, screening and utilization.
In M&A activities, the transparency and authenticity of information are the key issues that M&A enterprises need to solve, and sufficient information comes from their own due diligence. Through detailed investigation and analysis, we can find a lot of information that has a great influence on the business activities of enterprises except public information, and at the same time, through comprehensive analysis of the information, we can make the decision more wise. Therefore, in order to prevent the loss caused by information asymmetry to M&A enterprises, it is necessary to investigate the production and operation status of the target enterprises in detail before being merged, and decision makers must also fully participate in the M&A process of enterprises and participate in the value evaluation of major assets.
2. Pay close attention to the assets and liabilities of the target enterprise.
In the process of assets and liabilities evaluation, due to various reasons, the evaluation results will be inconsistent with the reality.
On the one hand, the combination and internal composition of assets are varied, and some assets also have their own particularities. Therefore, we should strictly distinguish between high-quality assets and non-performing assets, and effectively confirm and measure tangible assets and intangible assets to better reflect the actual situation of assets;
On the other hand, some contingent liabilities are often ignored due to the lack of necessary recognition conditions, and there is a large room for subjective operation, which requires scientific and rigorous recognition and measurement.
3. Evaluate the value of goodwill reasonably.
As a part of M&A cost, goodwill directly affects the purchase price of enterprises. Therefore, in addition to objectively and fairly obtaining the result of the self-created goodwill of the target enterprise, we should also strengthen the control of the self-created goodwill. Because the goodwill of the joint venture is the value-added part of M&A, which is determined by both parties through consultation, and it is a variable part, the acquirer can make efforts in a direction beneficial to itself and reduce the cost in this respect.
4. Choose an authoritative assessment agency.
Evaluation institutions play an important role in the evaluation of target enterprises, and their evaluation results also play a great reference role in determining the purchase price. In order to minimize the error and reduce the M&A cost caused by inaccurate evaluation, we should choose an authoritative evaluation organization, because the authoritative organization not only has a high-quality evaluation team, but also has a good professional quality. The selection of evaluation institutions includes the selection of securities firms, accounting firms, asset appraisers and law firms, with a view to further confirming information and expanding the scope of investigation and evidence collection.
5. Choose an appropriate evaluation method.
There are many methods to evaluate the value of the target enterprise, but not all of them are applicable. M&A's evaluation of the value of the target enterprise is essentially a subjective judgment, but it can't be priced at will, but there are certain scientific methods and long-term empirical principles to follow. Therefore, when selecting the evaluation method, we should pay attention to the fact that the evaluation method must match the value type and the object of evaluation.
(B) indirect cost control methods and measures
1. An enterprise's M&A should do what it can.
Enterprises should conduct mergers and acquisitions according to their actual capabilities and the inherent requirements of development, fully understand the industry characteristics and management requirements of the target enterprises, and be good at combining their own resource advantages? Including the advantages of human resources, and strive to minimize the capital cost, scale cost, management cost and human resources cost of the surviving enterprises.
In addition, while following the principle of increasing and maximizing the benefits of capital operation, it is necessary to prevent excessive intervention by administrative departments and obtain government policy support to ensure the smooth progress of enterprise mergers and acquisitions and create a good environment for enterprise expansion.
2. Comprehensive use of various financing methods.
Different financing methods will bring different capital costs and different financing risks. Enterprises can choose a financing method according to their actual situation and risk judgment, or they can combine a variety of financing methods. That is, choose two or more financing methods at the same time, effectively reduce the cost of capital while reducing the financing risk, and provide good conditions for the efficient operation of enterprises.
3. Choose a reasonable M&A method.
Different M&A methods are accompanied by different M&A purposes, and each has its own advantages and disadvantages. Enterprises should choose M&A method according to their own M&A motives. If enterprises pursue economies of scale, they should choose horizontal mergers and acquisitions, which not only reduces the unit cost of products, but also reduces competitors, because the object of horizontal mergers and acquisitions is their existing or potential competitors; If the enterprise aims at reducing transaction costs, it must choose vertical merger and acquisition, because this merger and acquisition method enables enterprises to realize vertical production integration, reduce market transaction links and their costs, and save a lot of time costs; If enterprises aim at diversifying business risks, they should choose mixed mergers and acquisitions to achieve diversified operations.
4. Make a reasonable M&A budget and strengthen budget control.
Budget should be based on M&A's objectives, and reflect the economic resources that enterprises must have and their distribution in order to achieve M&A's objectives concretely and systematically. For the continuation of the group company, budget control can be carried out according to the organizational structure, business scale and cost control characteristics of the merged company, and the following issues can be clarified:
(1) The budget should be prepared from the bottom up and finally approved by the Budget Committee. This not only refers to the opinions of the merged company, but also takes care of the interests of the merged company, which is conducive to the group company to continue to check and comprehensively balance its business activities and make the budget execution coordinated.
(2) Strengthen budget control, so that the acquired company can clearly define its management objectives and responsibilities of all parties, which is convenient for the acquired company to conduct self-control, evaluation and adjustment.
(3) Establish a computer network system to control the cost, and concentrate the capital operation and budget execution of the acquired company on the computer network, so that the group company can call and query the financial cost of the acquired company at any time, fully control the cost management of the acquired company, and find out the existing problems in time.