Leveraged Buyout Financing Structure Model

Compared with joint venture, the new, Union, the peeling, as an important means of integration, mergers and acquisitions do better in changing the market structure of industry. However, the limitation of financing mode restricted the majority of M&A process. When the time is right but companies do not have enough money, a special way of financing-leveraged buyout appears, and to get succss of LBO, the financing structure is one of the most important factors.The sources of LBO financing can be divided into debt financing and equity financing. Financing structure refers to the ratio of debt and equity, different financing structures will form different debt-equity ratio, the right of control will be different, which leads a different management structure, so the study in leverage buyout financing structure shows very important significance.Based on the comparison of financing structure models which established on various theories, with financing contract theory, we use multi-objective planning operations research methods, giving full consideration to the relationship among each parties, particularly commitment and stimulation of control, strarting from the greatest profit of entrepreneurs, we set up a analytical framework which can explain various contractual relationship, and bulid the best financing structure model which suit LBO properly. Besides, we select the LBO case of PAG and good baby group to examine the model.To solve the financing problem of LBO, not olny the financing structure is inculded, but also the financing tools and financing risks. In China, we should gradually improve the financial system and modify a series of unreasonable systems exsited in legal system, and each parties in the market need to do some skillful things within the framework of the existing system. making the channels of M&A financing smoothly and efficiency. Also the paper discuss the future development of this topic.