Research On The Risk And Prevention Of Exchangeable Bonds Applied In M&A

In recent years,exchangeable bonds have developed rapidly in my country’s capital market,reaching a blowout development trend in 2015 and 2016.With the gradual implementation of the exchangeable bond policy and the gradual maturity of China’s capital market,in addition to the simple reduction and financing of exchangeable bonds,companies and investors in the market gradually combine them with other capital operations such as mergers and acquisitions.The combination of restructuring and application can maximize the utility of exchangeable bonds in M&A financing.However,the risks arising from the application of exchangeable bonds in mergers and acquisitions have always existed.M&A itself is a transaction activity with multiple risks.In addition,exchangeable bonds,a financial instrument,will derive more risk points.Therefore,how to identify and analyze the risks of exchangeable bonds in mergers and acquisitions,and how to prevent these risks,etc.,are very important to whether companies can successfully apply convertible bonds in mergers and acquisitions in the future.This article conducts research through a combination of theoretical analysis and case studies.First,the basic theories of exchangeable bonds are sorted out,and then through theoretical analysis of the application of exchangeable bonds in mergers and acquisitions,the methods and terms of their application in mergers and acquisitions are studied,and then risks are identified on this basis,and possible Analysis of the risks that will arise.Finally,in the case part,first introduce the basic situation of the merger parties Apex and Lexmark.After discussing and analyzing the background and motivation of Apex’s acquisition of Lexmark,based on the aforementioned theoretical analysis,I will study the issue of exchangeable bonds for Apex to acquire Lexmark.Carry out financing terms design,identify and analyze the risks of the exchangeable bonds in the order of occurrence,and combine the merger and enterprise conditions to study the corresponding risks that may exist in the issuance of exchangeable bonds in the merger,and propose corresponding risks Preventive advice.The main research conclusions of this paper are as follows:The application of exchangeable bonds in mergers and acquisitions has more risks.According to the occurrence of various events of exchangeable bonds,the risks can be divided into issuance timing risk,stock price fluctuation risk,control risk,and compensation.Debt default risk,etc.If companies want to successfully issue exchangeable bonds to raise funds for mergers and acquisitions,they should make more adequate preparations for clause design and rational planning in terms of risk control.The control of risks arising from the application of exchangeable bonds in mergers and acquisitions is mainly from the perspective of enterprises.Especially in terms of the risk control of the exchangeable bond’s own terms,because this risk is mainly concentrated in the exchange risk and debt repayment risk,these two types of risks are mainly related to the terms of the exchangeable bond,so this article applies implicit in the case The level of financing cost is used to judge these two types of risks.When the implicit financing cost is the lowest,these two risks are also the lowest.The prevention and control of exchangeable bond risks requires not only the enterprise itself,but also the help of intermediary agencies.The supervisory authority should strengthen relevant supervision.At the same time,investors should also pay attention to careful investment.