New Research Of The Effectiveness Of Valuation Adjustment Mechanism In Private Equity Investment

Valuation Adjustment Mechanism(hereinafter “VAM”)is a very popular wordin private equity investment.The main forms of VAM are put options and cash offer.In the research findings of China,VAM is said to be an imported concept,but it is hardly to find any research findings about “VAM” in any foreign data-base.In fact,VAM mainly exists as redemption agreement in foreign country.The application and development of put options are quite mature in advanced finance market,the contents of VAM can be freely stipulated by both parties,including financial performance,non-financial performance,redemption fee,corporate behavior,listing and management goes.Nowadays,VAM are widely used in the valuation of a corporate,it is common to use performance or to be listed before a particular date as the “trigger” of VAM in China,and cash offer is very rare in foreign redemption agreement.However,the effectiveness of VAM has been very controversial since the first case of VAM,as known as “Haifucase” and the judging in theory and practice is also inconsistent.In recent years,as foreign capital coming in a continuous stream,the effectiveness of VAM will not only involve the risk and return of PE but also involve the financing efficiency and equity control of the target corporate as VAM is the core and crucial dispute of private equity investment.This paper includes six parts.The Introduction mainly deals with the background and significance of the topic,research status both in China and abroad,the research methods and the innovation of the topic.The Conclusion summarized the whole article and point ed out the deficiency of the article.Besides Introduction and Conclusion,there are four chapters of this paper.The first chapter is a brief introduction of the VAM.It mainly introduces the concept of VAM and recognized the legal nature,type of contract of the VAM,and therefore lay a foundation for the following analyzation.The second chapter filters the VAM in accordance with the contents of VAM,and introduces the relative successful story and legal precedents.And therefore brought in the keystone of the paper,the disputing VAM forms in the trial.?The third chapter analyzes the effectiveness of VAM in accordance with the theory of contract law,and confirms the effectiveness of VAM under contract law.Meanwhile,the writer analyzes the effectiven ess of VAM under company law and points out the limitation of VAM in investment of incorporated company.The fourth chapter is the innovation of the paper.Base on affirming the effectiveness of VAM,writer points out the commonness of VAMs that are easy to be invalid by the court.This chapter also points out the exception of the effectiveness of VAM under contract law and company law,and emphasizes the special limitation of the VAM between Target Corporation and foreign invested private equity funds.