شناسایی اهداف M&A و محتوای اطلاعات VC/PE Identifying M&A targets and the information content of VC/PEs

1. Introduction As newly revised regulations that encourage mergers and acquisitions (M&As) (e.g., ‘‘Measures for the Administration of Material Asset Reorganization of Listed Companies” and ‘‘Administrative Rules on Acquisition of Listed Companies”) are implemented, an increasing number of listed companies are striving to achieve rapid transformation and enhance core competitiveness through M&As. Thus, identifying highquality targets has become a crucial issue for listed companies. Although some companies possess innovative technologies, heterogeneous resources and new business models, they also face many challenges in the growth process, including a lack of funds, limited product development capability and restricted market expansion potential. These issues largely restrict the future growth of the companies (Zhu and Fei, 2010). As a result, when companies are unable to solve bottlenecks, they tend to seek help from more ‘‘well-off” companies. For the acquirers, these candidates can generate synergistic effects through resource complementation or enhancement, bring new profit growth and strengthen the acquirers’ core competitiveness. Hence, they are considered high-quality targets. Nevertheless, capturing useful information to identify these targets can be a difficult task, as many growing companies, especially startups, exhibit problems such as low information transparency, limited records of past transactions and the uncertainty of new product development (Elfring and Hulsink, 2003). In particular, due to confidentiality, target companies are often reluctant to disclose detailed information about core technologies and resources before confirming M&A transactions. Consequently, the information gap that arises during M&As poses a great challenge to acquirers when searching for high-quality targets. Research has found that venture capitalists (VCs) and private equity firms (PEs) can decrease the information asymmetry between companies and investors at the time of initial public offering (IPO) by providing ‘‘certification” (Megginson and Weiss, 1991). Can VC/PEs also decrease the information gap and play the role of ‘‘certification” during M&A transactions? In the recent years, due to the reform of the IPO system by Chinese regulators and the ‘‘Barrier Lake Effect,” the exit channel for VC/PEs has changed and M&As have gradually become an important exit channel. According to Wind, there were only seven cases of VC/PE exit through M&As in 2004 and an average of thirty-one cases per year until 2012. However, in 2013 and 2014, the number of exit cases through M&As jumped tremendously to 120 and 560, with total amounts of RMB12.835 billion and RMB68.562 billion, respectively. The difference in book returns between IPO exit and M&A exit is shrinking. Therefore, M&As are becoming one of the main ways for VC/PEs to exit and are expected to become the ‘‘new norm” in the near future. This offers us the opportunity to investigate whether VC/PEs have information content in the Chinese M&A market. When VC/PEs send positive signals to the market, this indicates that VC/PEs play a ‘‘certification” role in the M&A market. This also decreases the information gap in the M&A process and provides practical guidance for acquirers to identify high-quality targets.