(I) Risks of Value Appraisal From the perspective of the subject and object of value appraisal, on the one hand, due to information asymmetry, the main M&A company or the third-party asset appraisal institution cannot obtain sufficient information of the target enterprise when conducting due diligence; On the other hand, due to moral hazard, the main M&A company may face the deliberate concealment of third-party asset appraisal institutions or target enterprises. From the perspective of value evaluation methods, the methods of enterprise value evaluation include discounted advanced flow method, internal rate of return method, replacement cost method and price-earnings ratio method, and different evaluation methods get different evaluation results. In addition, influenced by macro and micro markets, there is great uncertainty in the future income of the target enterprise. All the above reasons lead to the risk of target enterprise value evaluation.

(2) The financing risk is that in order to raise enough M&A funds, the enterprise carries out internal or external financing, and the capital structure of the enterprise changes greatly, thus bringing financial risks. Enterprises using internal funds to pay can reduce the financing cost, but the decrease of liquidity will make enterprises face the problem of capital turnover; By issuing stocks and bonds for financing, the company's control rights will be diluted or face huge debt pressure.

(3) Payment risk enterprises can pay the consideration through cash payment, stock payment, leverage payment and mixed payment. Cash payment is simple and fast, but it will put pressure on the cash flow of enterprises and bring liquidity risk; Stock payment will increase the cost of enterprises and bring dilution of equity; Leveraged payment increases the leverage ratio and makes enterprises face high debt risk; Although mixed payment can integrate the advantages and disadvantages of various payment methods, it will also increase the difficulty of financial integration after the merger.

(IV) Risk of Financial Integration After the completion of M&A, the main merger company usually integrates M&A in all directions, in which financial integration is the core link of M&A integration. In the process of financial integration, the differences in financial systems, financial institutions and financial personnel training norms between the two sides all increase the difficulty of financial integration, and even lead to problems such as increased M&A cost and shortage of funds, which makes enterprises suffer losses.

Source: Jinxiu Night 2020 10