| M&A(Merger and Acquisition)are important ways of social resource reallocation. China' s economy is in the stage of quantity adjustment and industrial structures excellent turn. M&A have important strategic meaning to the reorganization of the state-owned property and our company' s international competition ability. In M&A, financing is a key factor. But in China financing is still the bottleneck of merger and acquisition transactions.Merger and Acquisition have developped for hundred years in the west,and have established a set of mature theories and operation procedures. These theories include MM' s propostion, agency cost theory, signaling theory, Pecking order theory and coporate control theories etc.. Financing tools for mergers and aquisitions include internal financing, commercial loan, commercial paper, coporate bond, stock, convertible bond, stock options etc.. Leveraged buyouts(LBO), management buyout (MBO), and employee stock ownership plans(ESOP) are also uesed.In China, financial tools do exist,such as commercial loan, notes, bond, stock etc., but financing tools for M&A is limited: commercial bank loan is not allowed to be used in M&A;commercial paper market does not exist;corporate bond and convertile bond are strictly supervised and mostenterprises do not have access to;Junk bond is prohibited;stock issue have high request and only a handful of business enterprises can attain; selling part finacing is also forbid by the law. M&A finacing for small and medial enterprises , MBO and ESOP is especially difficult. Futhurmore, there are many illegal ways of doing in practice.The reasons of the above problems lie in:Supervision by the law is too strict in areas like loan, stock, bond, convertible bond, selling part financing, share mortgage loan, MBO and ESOP; The financial market is incomplete, having no market for commercial paper-, The business enterprises and investors do not have enough ability to handle the risk they are running into,which holds back the application of derivatives in M&A financing; The ownership split of share in listing companies and the nonpefection of the law system are the reason of all kinds of incorrect practice in merger and acquisition financing; In past decades Chinese companies had paid most of their profit to state, therefore, do not have enough internal financing resourses; Lack of organization investors, finance not flourishing, and low wages system of manager etc., aggravated the MBO financing problem.Aimed at above-mentioned problems arid the reason analysises, draw lessons from the west M&A financing theories and practice, we should adopt the following strategies to development China' s M&A financing markets:Relax the finance control, include application of loan in merger and acquisition, bond issue qualifications and use limit, selling party financing limit etc. ; Builds up starting business sector in stock exchange,provid IPO opportunities for medium and small business enterprises, promote excellent medium and small business enterprise' s expantion and development; Promote the full share circulation reform, breaking the situation of share ownership split which is the headspring of all kinds of unstandard operations and practices-, Develop merger and acquisition financed by exchanging stock, spring up larger scalestratigic industrial M&As; Revise the law, sweep away obstacles in law systeme for management buyouts. Set up MBO funds and trust fund to provide financing source for management buyouts-, Develop the business enterprise bond market; Support and develop institutional investors; Establish special tax policy to encourage financial institutions more actively take part in merger and acquisition, especially in ESOP programme; Cultivate the native investment banking industry, encourage them play more important role in M&A transactions; Develop derivatives such as convertible bond, stock option etc., encourage financial innovation and promote the development of native merger and acquisition activities. |
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