Valuation Adjustment Mechanism in M & A: Application, Analysis and Enlightenment

Abstract

As a creative form of contract, the valuation adjustment mechanism is applied in M & A for many companies. Measures for Administration of Material Assets Reorganization of Listed Companies, which were adopted on November, 2014, required that listed companies must sign VAM with counterparty when pricing the assets. In M & A, the use of VAM can improve the efficiency and reduce the risk of failure. Based on the case of BlueFocus merged Accurate Sun, this paper thoroughly analyzes the structural design of VAM and its effects. Some suggestions are proposed in this paper in order to explain how to use VAM successfully.