Preventing Merger and Acquisition Risks: Evidence from Tianqi Lithium's Leveraged Acquisition of SQM

Abstract

With the deepening of China's opening-up process and the promotion of the "Belt and Road" initiative, the wave of cross-border mergers and acquisitions by multinational corporations has officially started. Leveraged buyouts, as a special way for companies to carry out cross-border mergers and acquisitions, have also attracted the attention of enterprises and have been widely used. On this basis, this paper selects the 2018 Tianqi Lithium acquisition of SQM case, introduces the background and details of the acquisition, and analyzes the financial and non-financial risks brought by the acquisition. Furthermore, the paper investigates how the company solved the debt crisis and the impact of the acquisition on its profitability. Based on the above analysis, there are significant risks in pricing, financing, and debt repayment for the Tianqi Lithium acquisition. Recommendations for relevant enterprises on how to prevent financial risks are also provided. Overall, the analysis of the Tianqi Lithium-SQM leveraged buyout case sheds light on identifying and managing financial risks associated with cross-border leveraged buyouts, guiding further exploration of this topic.