Research On Risk Management Of Tianhai Investment's Transnational Leveraged Buyout Of Ingram Micro

In recent years,under the guidance of "going global" strategy,supply side reform and "one belt and one way" construction,the amount of overseas investment of Chinese enterprises has increased rapidly.With the change of international economic and political situation,the uncertainties of enterprises are increasing,and cross-border M&A activities are exposed to multiple risks.With the expanding scale and increasing amount of transnational mergers and acquisitions,the form of leveraged buy-outs(LBOs)relying on large-scale external financing has been widely used in transnational mergers and acquisitions of Chinese enterprises,which further increases the potential risks of M&A activities.Due to the lack of relevant experience,some enterprises neglect the management of potential risks in actual M&A transactions,resulting in the failure of transnational leveraged buyout transactions.2016 is the peak of the number and scale of cross-border M&A of Chinese enterprises.Since the end of 2016,the state has issued a number of policies to clean up illegal cross-border capital flows.Domestic regulators also strive to de-leverage financial institutions.Therefore,how to manage the risk of cross-border leveraged buyout activities under the background of tightening regulatory environment and financial de-leveraging is worth deeply thinking,which is also of great significance to make up for the lack of experience of enterprises and meet the needs of macro-market.As a typical transnational leveraged buyout enterprise,Tianhai Investment has accumulated experience in M&A transactions and its own risk management activities provide a good reference for other enterprises.This paper takes the case of Tianhai Investment's transnational leveraged buyout of Ingram Micro as the research object,and adopts literature research method and single case study method to study the risk management of Tianhai Investment in this M&A transaction.Firstly,this paper elaborates the relevant literature,concepts and theories of transnational leveraged buyout risk management.Secondly,this paper introduces the transaction process of Tianhai in the transnational leveraged buyout,and combs the current situation of risk management of its M&A transaction from three aspects: risk identification,risk assessment and risk response.Finally,this paper summarizes the deficiencies from the current situation of risk management of Tianhai,and put forwardsrelevant supplementary suggestions.Through the analysis of the case,this paper argues that although the cross-border leveraged buyout has been successfully delivered,there are still some risk points worthy of attention in the transaction process,and there are still some deficiencies in the risk management of Tianhai through this transaction.The research finds that in the process of risk identification,Tianhai identifies the political risk,market risk,business risk,financial risk and integration risk it faces in the transnational leveraged buyout by using the methods of risk expert survey enumeration method more comprehensively.In the process of risk assessment,Tianhai assesses market risk,business risk and financial risk by using the methods of foreign exchange exposure analysis and asset financial status analysis.But Tianhai`s political and financial risk assessment process is relatively single,so the company should select political risk assessment index,leverage analysis method,Z-Score bankruptcy model and other evaluation methods rationally,or employ external professional institutions to assist enterprises in risk assessment to ensure that the assessment results are more accurate and reasonable.In the process of risk response,Tianhai responds to risks by establishing risk control models,using hedging tools,divesting non-core businesses,and formulating training plans.But Tianhai lacks more substantive measures to deal with political and financial risks,so it is necessary to improve the level of specialization in dealing with political and financial risks.The company can disperse political risk by choosing diversification strategy of investment and financing,purchasing political risk insurance,strengthening the sustainable management of political risk;and reducing financial risk by innovating multiple financing channels,so as to ensure that identified risks are within the control of enterprises.It is hoped that the analysis of this case can provide meaningful reference for the research on risk management of transnational leveraged buyouts in China,and provide enlightening experience for enterprises in the future development of transnational leveraged buyouts.