Study On Risk Control Of Valuation Adjustment Mechanism In Private Equity Financing In Country Garden

In recent years,more and more enterprises tend to choose private equity to finance.In order to reduce the risk of investment,investors often need to adopt the valuation adjustment mechanism with the financing enterprises.Objectively speaking,the application of the valuation adjustment mechanism is also due to the difficulty of making a correct judgment on the actual situation of the future development of the enterprise.Therefore,it is necessary to adjust the initial investment amount according to the actual performance that the future operation of the enterprise may produce,and further delimit the interests boundary of the two parties.Generally speaking,the professional literacy of private equity investment is strong,which can often seize the opportunity for the enterprise to be in urgent need of funds,adopt the valuation adjustment mechanism which is more beneficial to the investor,such as the price of the equity transfer of the enterprise,etc.,and how to control the risk better in private equity financing based on the disadvantaged position of the financing enterprise? In the face of this discussion,this paper will conduct a case study on the valuation adjustment mechanism in private equity financing from the perspective of the financing side.Country Garden provides 10% of Guangdong's houses every year.After the listing in April2007,the speed of expansion in the whole country has accelerated,and continue to copy its business model to the new market.So it is inevitable that there will be insufficient liquidity.In addition to the debt pressure that China Bank of Hongkong is about to expire,Country Garden decided to raise $1 billion 500 million in debt financing in October 2007,but the debt financing was not realized because of the impact of the financial crisis.In this case,in order to repay the debt which is about to expire,Country Garden chooses private equity financing and accepts the valuation adjustment mechanism.In fact,in order to carry out private equity financing,Country Garden may have the risk of blind adopting of the valuation adjustment mechanism or the high standard of the valuation adjustment mechanism,and there may be the risk that the standard of the valuation adjustment mechanism can not be realized or the irrational expansion of the enterprise.In addition,the short-term behavior of the managers,the short-term behavior of the investors and the loss of the right of enterprise control may exist.The risk factors analysis in the valuation adjustment mechanism of private equity financing of Country Garden is the core of the full text.In view of the above risks,by summarizing the risk control measures taken by Country Garden,we find that Country Garden has a better control over the risk of the loss of corporate control,and has further risk control measures after the acceptance of the valuation adjustment mechanism.Thus,we can make suggestions on the risk control measures that can be taken by the enterprise at the stage before adopting the valuation adjustment mechanism and at the stage of adopting the valuation adjustment mechanism.Specifically,before accepting the valuationadjustment mechanism,the financing enterprise should carefully consider whether it have to choose the way of private equity financing in assessing the necessity of the application of the valuation adjustment mechanism,and accurately measure the strength of the enterprise itself,that is,rationally estimate the potential and risk bearing capacity of the enterprise.When applying the valuation adjustment mechanism,the financing enterprise should reasonably set up the index of valuation adjustment mechanism.If Country Garden have to adopt the valuation adjustment mechanism,it should set up more reasonable standards and chips of the valuation adjustment mechanism,in order to prevent the short-term behavior of the management and avoid increasing the irrational expansion of the enterprise.The financing enterprise also should adopt the form of repeated game,and set exclusions and stop loss clauses in the valuation adjustment mechanism.