Analysis on Motivation and Risk of E-commerce M&A: Alibaba's Acquisition of Sun Art Retail

Abstract

With the rapid development of e-commerce in China, the competition among enterprises in the market is becoming increasingly fierce. Many enterprises try to obtain competitive advantages in the market and reduce the risk exposure through mergers and acquisitions. However, corporate mergers and acquisitions is a complex activity and there exists various risks in the process, e.g., financial risk, which directly affects the success of M&A and the development of enterprises after M&A. Based on the case of Alibaba's acquisition of Sun Art Retail, this paper investigates the possible risks of M&A based on motivation analysis and performance analysis. According to the analysis, the acquisition of Sun Art Retail in the short term has brought great growth ability to the profitability of Alibaba, but reduced the debt solvency of Alibaba as well. Given the result of the analysis, this study provides three main measures to manage risks and improve the risk management capability. Overall, these results shed light on guiding further exploration of e-commerce mergers and acquisitions and the new retail model.