Analysis of the Synergies Caused by M&A: Evidence from Midea's Acquisition of Little Swan

Abstract

Since the reform and opening-up, China's household appliance industry has become quite competitive in the world. The penetration rate of domestic household appliances is relatively high, the market has turned to the stock market, the industry has entered a relatively mature stage, and the industry concentration has increased significantly. In the first half of 2018, Haier Exhibition, China's leading washing machine brand, had a market share of 30.50%, Little Swan accounted for 17.20%, and Midea Group accounted for 9.30%. In order to enhance its overall competitiveness, Midea Group merged with Little Swan in 2018 by means of A-share issuance for share exchange absorption and partial offer. This article will first explain the research background, i.e., the competition in the home appliance industry in 2018. This is followed by a brief introduction to the development status of the acquirer, Midea Group, and the target Wuxi Little Swan before the acquisition. Afterwards, it focused on the analysis and evaluation of the synergy effect after the acquisition of Little Swan from Midea Group. It is found that Midea did improve the corporate value of Midea Group, and its development methods were used for reference by relevant enterprises. Midea Group and Little Swan are both listed companies, and this merger is the first private enterprise to merge with an A+B share listed company in China. These results shed light on guiding further exploration of mergers and acquisitions in the same industry.