A Study On The Pricing Problem Of Management Buy-Outs (MBO) In State-Owned Enterprises

The pricing problem is the core and focus in the process of Chinese state-owned enterprises practice of Management Buy-outs (MBO). This paper argues that it is not reasonable of the present pricing way for the price is decided according to the Net Asset Per Share. As a result, many State-owned assets are lost and the benefits of minor stockholders are damaged. Aiming at present situation, through carefully research of enterprise valuation and Fuzzy Analytic Hierarchy Process (FAHP), this paper brings out a relatively reasonable method .The author considers that the price of MBO should be based on the enterprise value which may evaluated through Discounted-Cash-Flow method, furthermore the history contributions of the managers should also be considered and be converted to a certain amount or a certain percent, then through the auction mechanism in the negotiation process the price of MBO can be finally decided. This paper belongs to National Natural Science Foundation Project "Research on the Pricing of Property Rights Reflected Fluctuating under Distortion of Information" (No.70441024).There are six parts in this paper.Part one is the introduction, which states the background, the situation of the research of MBO in the domestic and international, logic route and the research method of this thesis.Part two introduces the brief concepts of the developing progress of MBO in Chinese state-owned enterprises, including its background, basic characteristic, and the motive of MBO in SOE. The pricing way is minutely analyzed and its resolution is also introduced in this part.Part three is about the evaluation methods of the enterprises value. The meaning of enterprises value is firstly discussed. In this paper, Discounted-Cash-Flow method is considered to be a scientific way. Entity Discounted-Cash-Flow method is used in this thesis to appraise enterprises value. Based on the things above, a relatively scientific pricing method of MBO is determined.Part four focuses on the problem of the managers' history contribution. Managers' history contribution is a necessary factor considered during MBO pricing process. In this paper, Fuzzy Analytic Hierarchy Process method is applied to quantify the managers' history contribution. This result can be reflected in the price of MBO. Thus, the academic price is determined.Part five analyzes the problems in the negotiation process on MBO, and gives out some suggestions about the rules on MBO.Part Six is the conclusion of the paper. This part also puts forward some other issues that need further consideration.