A Mixed Securities M&A Defrayment Decision Model Based On Capital Structure

As the last step of M&A, the defrayment mode relates with the valuation and the choice of financing strategy straightly. Besides, it is one of the most important factors to put the M&A exchange over. Due to the history issue of Stock Market, studies on the application of mixed securities defrayment mode for M&A in China remain few. Now, with the reformation in equity capital market, M&A will be more active and the defrayment modes will be more innovative in the future.The main content of this paper is to study the actual application for the "shares plus convertible bonds" defrayment mode with an aim of providing a more efficient way for the boom of M&A.Three parts compose the frame of study.Firstly, it is an analysis of the actuality of shares defrayment and convertible bonds defrayment. The differences between the two modes are compared based upon the analysis. Further, the paper puts forward a new mode in which the necessity and feasibility of the mode make the main content of Part 1.Secondly, the paper considers that keeping the reasonable capital structure is the only principle that the decision of mixed securities defrayment must to follow. The model adopts multiple criteria decision making to allocate the shares and convertible bonds in the defrayment structure. The multiple criteria have many aspects including cost, revenue and risks restriction.Finally, the model is applied in a case happened in 2004. In the case the TCL Group simulates a scene in which the Group does not only publish its shares but also convertible bonds to aimed shareholders. Therefore, how to allocate the proportion between the two securities is the most important issue in the situation. And that is just what the paper aims to solve.