First, the financial management in the pre-merger research process
In the process of enterprise merger and acquisition, preliminary research is an indispensable link, and the departments usually involved include personnel, legal affairs and finance. Because the results of the previous research will be an important reference for the decision-making body of the enterprise, if the research is not sufficient and the key issues are not revealed, it may have a certain adverse impact on the M&A decision. As a financial department, we should pay more attention to the asset structure and composition of enterprises, existing financial risks or events, and make an objective and fair evaluation of the financial situation of enterprises.
1. Systematically understand the assets of M&A enterprises.
Different accounting policies and accounting estimates will lead to changes in the assets and liabilities of enterprises. As financial personnel, they should fully understand the financial accounting of M&A enterprises in the process of preliminary investigation to avoid puffiness of balance sheets. The focus should be on total assets, net assets, registered capital composition, major liabilities, off-balance-sheet burdens of enterprises, etc. Through investigation, we have a general evaluation of the financial situation of M&A enterprises.
2. Understand the financial risks of M&A enterprises.
Financial risks include internal risks and external risks, which should be paid full attention to in the early stage of investigation. Internal risks include whether the basic work of financial management is perfect or not, the professional quality of professionals, the setting of financial institutions, financial decision-making ability and capital structure, while external risks include tax risks, guarantee risks and litigation risks. Understanding the financial risks of M&A enterprises can be obtained through external relevant institutions and internal inquiries of relevant personnel.
Second, the financial management in asset appraisal
Judging from the current common practice of mergers and acquisitions, enterprises will make a preliminary intentional plan for mergers and acquisitions after completing the internal research procedures in the early stage. As the basis of later negotiation, asset appraisal often employs intermediary agencies to evaluate the assets of the enterprises to be merged, so asset appraisal is extremely important, so the financial management in the process of asset appraisal is also very important. At present, the process of asset appraisal mainly includes several points: First, an intermediary agency should be hired, and a specific intermediary agency with good credit should be hired for appraisal. The common practice is to select several intentional partners, and then make a selection based on quotation, credit standing and previous cooperation; The second is to select the evaluation benchmark date, which has an impact on the evaluation results and the validity period of the later period of the report; The third is to determine the evaluation scope, and all subsidiaries and Sun companies should be included in the evaluation scope. The fourth is to use appropriate methods to evaluate. At present, the evaluation methods include cost method and income method, and the results of different evaluation methods may be far apart. The financial department should pay attention to the appropriateness of the evaluation methods of intermediary institutions.
Because of the dynamic production and operation of the enterprise to be merged and the unequal access to information, we should focus on potential risks in the evaluation process. First, the guarantee risk, many enterprises will form a mutual insurance relationship with other enterprises because of the need of financing. In the process of evaluation, we should fully understand the matter and identify the mutual insurance risks. Second, contingent risks, through the further analysis and demonstration of existing data, and conversations with executives, legal advisers, financial personnel and other personnel, to identify the contingent risks existing in enterprises. The third is to analyze important contracts, which will often have a significant impact on the financial situation of the enterprises to be merged in the later period, and should be analyzed emphatically. Fourth, focus on intangible assets such as land use rights, development expenditure, patented technology and goodwill, and pay attention to the rationality of their evaluation methods and evaluation results. Judging from the purchase price of most enterprises at present, the evaluation premium is mainly concentrated in intangible assets, but it is often difficult to really judge the evaluation results of intangible assets, which has become the main controversy in the later negotiations.
Third, the choice of M&A payment methods
After the asset appraisal is completed, the parties involved in the merger will negotiate the merger price. For financial management, the most important thing is the payment method of M&A price. Merger and acquisition of enterprises will involve different financial methods, and these different payment methods will have different effects on the acquired enterprises and even affect the value of enterprises.
Under the restriction of existing financial instruments, there are three main payment methods for mergers and acquisitions: one is cash payment, which means that the acquiring enterprise obtains the assets or control rights of the target enterprise by paying cash. The cash payment method requires the acquirer to raise a large amount of cash to pay for the acquisition, which will bring great financial pressure and risks to the acquirer. Second, the securities payment method refers to the acquisition process in which the acquiring enterprise issues new securities (stocks or bonds) in exchange for the target enterprise (assets or stocks). It also includes stock payment, bond payment and hybrid securities payment. The choice of stock payment will dilute the control right of existing shareholders, while the choice of bond payment will bring debt pressure to enterprises. The third is leveraged buyout, which means that a few investors buy the assets or shares of the target enterprise through debt (usually high debt ratio). In China, the payment methods of M&A mainly include cash payment, asset replacement payment, mixed payment and debt assumption, among which cash payment is the main method. The acquisition enterprise should weigh the advantages and disadvantages of various ways to the enterprise. If the capital flow is not smooth enough, it should reduce the amount of cash payment as much as possible, and at the same time choose a reasonable financing method to avoid the risk of breaking its own capital flow.
Fourth, the financial management after the merger
Integration is the most critical step in the process of M&A. Without successful integration, it is difficult to achieve successful M&A.. Financial integration after M&A is the basis of M&A integration, and successful financial integration is the premise of successful M&A integration and an important guarantee to realize the ultimate motivation of M&A.. The financial integration of enterprise mergers and acquisitions mainly includes the following aspects:
1. Integration of financial objectives.
The goal of financial management is the starting point and end point of financial management. Only under the guidance of unified financial management goals can the new financial management organization operate normally and effectively. Acquired enterprises should transmit their financial objectives to M&A enterprises as soon as possible through internal training, publicity and other means, and at the same time, they should pay attention to ways and means to avoid causing dissatisfaction among M&A enterprises and increasing the difficulty of post-merger integration, so as to achieve effective integration.
2. Integration of financial system.
The integration of financial system is the choice of a series of financial policies implemented by enterprises, including the integration of financial accounting system, internal control system, investment and financing system, dividend distribution system and credit management system, which guides M&A enterprises to establish various financial systems consistent with their development goals. In the choice of accounting system, try to make the merger and acquisition enterprises consistent with the acquisition enterprises.
3. Integration of financial organizations and functions.
Before M&A, based on the status of different stakeholders, the financial management institutions of M&A parties are quite different, and the staffing standards are adapted to the respective business scale, business process and organizational objectives of enterprises. After the merger, it is necessary to unify the financial management institutions of all parties to the merger, and achieve the fundamental control of the financial management of the acquired party through the selection of suitable financial management personnel. First of all, we should make clear the specific responsibilities of each post and personnel, divide the work carefully, clarify the rights and responsibilities, and achieve a balanced and equal right, responsibility and benefit, so as to prevent the jumble of posts and avoid the waste of personnel. Thirdly, by establishing and improving the assessment of each responsibility center, we should unify the performance appraisal index system, unify the incentive mechanism of personnel and institutions throughout the company, and give full play to the incentive role of salary.
4. Integration of funds, especially monetary funds.
There are costs and risks in holding funds. After M&A, the structure of funds is changed, which makes the structure of funds unreasonable, and the cost and risk of holding have changed. Therefore, financial integration should also rationalize the amount of funds held and the structure of funds to reduce the cost and risk of holding funds. A fund management system suitable for M&A enterprises should be established as soon as possible, and comprehensive budget, dynamic monitoring and internal audit should be adopted to prevent and control financial and operational risks with cash flow as the link and information flow as the basis. At the same time, the effective management of funds can be realized by combining the actual management methods of the acquired enterprises, and enterprises with conditions can implement centralized and unified management of funds to maximize the efficiency of the use of funds.
5. Integration of existing assets and liabilities.
In order to achieve the purpose of reducing operating costs, expanding market share, optimizing the allocation of resources and enhancing core competitiveness, enterprises must integrate, reconfigure and optimize the combination of assets and liabilities of all parties to the merger. In the early stage of M&A, the key point should be to straighten out the assets and liabilities of the M&A enterprise, and analyze the rationality of some interest-bearing debts to reduce unreasonable expenses. Unreasonable occupation of assets should be collected.
6. Integration of budget system.
Budget is a kind of target value, and the budget system is an operating system with the realization of target value as the axis. It not only connects all kinds of resources of enterprises with the realization of enterprise value, but also takes the target value as the benchmark, and all behaviors of enterprises can only be integrated into the realization of value through the budget system. Merger and acquisition of enterprises will inevitably bring about the combination of different value goals and different enterprise behaviors. Therefore, the unification of value goals and the coordination of all enterprise behaviors must be achieved through the integration of budget methods. Only by building a scientific and perfect budget system can the success of merger and acquisition integration be realized and the value of enterprises be increased.
(Author: Phoenix Optical Group Co., Ltd.)