On The Financing And Payment Risk Of "Snake Swallow" Multinational M&A

In recent years,the Chinese economy has entered a critical period of shifting economic restructuring and growth momentum.Cross-border mergers and acquisitions provide opportunities for listed companies to quickly obtain high-quality overseas resources and achieve strategic synergy and expansion.Industrial integration,industrial upgrading and integration of industry and finance have become the main direction of Chinese companies' cross-border mergers and acquisitions,and are also the core opportunities for the development of overseas M&A markets.After the accumulation of capital and experience by Chinese companies,the scale and number of cross-border mergers and acquisitions are growing.In the many cases of cross-border mergers and acquisitions in recent years,the cross-border mergers and acquisitions of Chinese enterprises have become more and more characterized by “snake swallowing”,namely,“small fish eat big fish” and “the weak merger the strong”.In the “snake swallow”,whether the financing and payment methods are reasonable or not has played a key role in the success of M&A activities.In order to study the risk of cross-border mergers and acquisitions with a large amount of funds to stimulate large-scale mergers and acquisitions with the participation of M&A funds,this paper uses the financing method and payment method as the entry point,based on the listed company China Tianying Snake swallowing-style cross-border M&A activities from 2016 to 2018,summarizing the introduction of M&A funds in cross-border M&A,the application of financing methods and payment methods,and the effectiveness in financing and payment,while identifying relevant risks the financing methods and payment methods brought about behind this series of activities,and proposed risk prevention and control.Through the study of the case,this paper concludes that China Tianying set up a merger and acquisition fund for cross-border mergers and acquisitions,and achieved remarkable results in financing payments.First,use the M&A fund model of “controlling shareholder + PE+ listed company” to control the acquisition process and grasp the key nodes in M&A financing;second,in terms of financing methods,the real stock of the real debt will be introduced into the equity investor to raise the M&A funds;third,the use of the middle layer of the transaction structure for asset pledge to obtain offshore bank loans,ease the pressure on funds;fourth,listed companies withdraw from the M&A funds in advance,avoiding the risk of regulatory approvals caused by cross-shareholding;fifth,in the payment method of mergers and acquisitions,the use of installment payment and contingent payment methods to alleviate the valuation risk brought by information asymmetry;sixth,equity leverage,bond leverage and multi-layer structure involve greatly enhance the ability to raise funds,and ultimately completed the cross-border merger of “snake swallow”.However,it should also be realized that based on the structural arrangement of the M&A fund and the risk identification and control of the relevant financing payment links,this paper proposes the following risk control measures: First,increase the binding clauses,optimize the internal cooperation mode of the M&A fund,and adopt Transparent and rigorous mechanism to alleviate the principal-agent risk of the M&A fund itself;second,try multiple payment methods to alleviate the pressure of capital flow caused by all-cash payment in cross-border M&A and reduce the valuation risk;third,in cross-border M&A the exchange rate risk should be carried out before and after the prevention and control,introducing financial derivatives to avoid exchange rate risks,and introducing various interest model to reduce the interest rate;fourth,prudently determine the reorganization plan,optimize the transaction structure design,and grasp the control rights of listed companies;fifth,enhance compliance awareness,pay attention to supervision points in real time and learn from experience,reduce the risk of approval,and ensure the success of mergers and acquisitions.The main innovation of this paper is the in-depth analysis of the financing and payment methods of “snake swallow” type cross-border mergers and acquisitions,the identification and analysis of the risks brought by the financing and payment of M&A funds,and the integration of risk identification and risk control into enterprises.In the chain of cross-border mergers and acquisitions,it provides a reference for cross-border M&A activities with such characteristics.