| This year,China will usher in the 40 th anniversary of reform and opening up.In the past 40 years,China has made remarkable achievements in economic development.The market economy system has been established and economic growth has been steadily improved.At this stage,however,leveraged buyouts(LBO)are still in its infancy.Regardless of the success rate or risk response measures of leveraged buyouts,there is a big gap between the enterprises and the Western developed countries where the capital markets are more mature.For the domestic market,leveraged buyout is still a new thing.Under the macro background of the “the Belt and Road Initiatives”,countries are closely connected to create prosperity.Leveraged buyouts will usher in a golden era as a financial innovation tool.This is both an opportunity and a challenge for our country.The opportunity is to provide a great opportunity for companies to scale up,and the challenge is that if they can't handle the risks in leveraged buyouts,they may push the company to the brink of bankruptcy.With the steady development of the economy and the maturing market,mergers and acquisitions are in full swing.The existing experience and situation show that the current financing model of mergers and acquisitions is in short supply.In order to cope with the fierce market environment,it is necessary for enterprises to improve the core competitiveness steadily.Focusing on core business,integrating high-quality resources in the industrial chain,and extending financing channels for mergers and acquisitions has become an effective way for business development.However,the small and medium-sized enterprises in China have low accumulation efficiency,and it is difficult to achieve rapid development simply by relying on their own capital.The leveraged buyout model,which mainly relies on huge financial leverage to achieve financing mergers and acquisitions,has the characteristics of high yield,high risk,high leverage and high technology.LBO,as a late acquisition mode in China,has attracted more and more attention of the small and medium-sized enterprises in the form of acquired with small capital.Although for our country,this relatively new acquisition model can help companies to expand the scale and quickly achieve strategic goals,its features of high-risk are often easily overlooked,leading to the ultimate failure of mergers and acquisitions.As China's capital market is not mature enough and there are few successful cases of leveraged buyout,the systematic risk aversion system has not been formed.When a company uses leveraged buyout as a financing option,it cannot accurately understand its inherent risks.The acquisition activity is at an exploratory stage.Not only that,the entire leveraged buyout process also needs to assess its subsequent development.Completion of the acquisition is not the same as successful acquisition.If the company can't repay its debt through future operations,and gradually reduce its debt ratio,it means that the final result of leveraged buyout is also a failure.This article uses the related theories involved in leveraged buyout risk as a support,introduces the process of LBO and its risk identification in details,and summarizes the risks into three categories: financial risk,operational risk,and information risk.In addition,the successful case of Geely's leveraged buyout of Volvo cars is analyzed to further study the whole process of the acquisition of the case.This paper highlights Geely Group's legal dilemmas and pricing risk in the early stages of preparation,the financing structure risk and operating mechanism risk in the implementation of acquisitions,financial internal control risk and strategic positioning risks,cultural conflicts in acquisition completion stage,and the risk response measures taken by Geely Group at various stages.Finally,by evaluating the advantages and disadvantages of each risk response measure,this paper provides reference for the risk prevention and response of the small and medium-sized enterprises in the future. |
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