Study On Valuation Adjusted Mechanism

Valuation adjustment mechanism (VAM) is often used in private equity investment as a subordinate agreement incarnated in form of an attachment clause to investment agreement. It’s a high-risk, high-return investment. VAM, also known in Chinese as" Gambling Agreement", is not an agreement on gambling, rather an agreement between the investor(s) and the investee concerning valuation adjustments on the investee and Price balancing. In essence VAM is about having the investee’s commitment on future Performance as the base and the Premise for the valuation and hence the valuation of the investee is to be adjusted based on the achievement of the future Performance targets as well as resulting compensation if any. However, China’s VAM progresses on the basis of lacking understanding and knowledge, it triggered many disputes. As the first VAM case in China, Haifa Suzhou VS. Shiheng Gansu, it happened just after Mengniu Dairy and Stanley; Yongle electrical appliances and CDH investment; the Prince milk and Goldman Sachs etc. or success or failure cases, it took three years and create a great sensation of the case,This paper put this case as the main line, and divided into three parts, first introduce the basic facts among the case and issues it briefly.The second parts is the analysis of the details and the controversy in this case. Eoutlined the basic facts of the case as well as the three courts on the basis of the results of the trial and judgment based on a comprehensive detailed analysis of the case. Deep-seated problems in the course of a hearing of the courts at all levels as a starting point analysis of the current legislation lag. Finally put forward the author’s opinion:specification, in order to eliminate the problems, we must consider the contents of the gambling agreement legislation first prerequisite for the unity of the legal system reform. The purpose of this paper is to draw more widespread concern on the community, and law experts and legal practitioners to define it early, hope this paper can provide a useful reference in order to push the legislative process.