Research On"Snake Swallows Elephant"Cross-Border M&A Financing Strategy

In the process of global integration,China’s "Belt and Road Initiative" and "going global" strategies have been implemented in greater depth,Chinese enterprises have begun to use cross-border mergers and acquisitions to optimize resource allocation after accumulating capital and experience to achieve strategic synergy and achieve industrial integration and upgrading.Affected by the epidemic,the trend of cross-border mergers and acquisitions of Chinese enterprises has eased in the past two years,but in the long run,the economic strength and international influence of Chinese enterprises are constantly improving,and China’s cross-border mergers and acquisitions activities will gradually return to a growing state in the future.In many cases of cross-border mergers and acquisitions,the cross-border mergers and acquisitions of Chinese enterprises are increasingly showing the characteristics of "snake swallows elephant".However,cross-border mergers and acquisitions of the "snake swallows elephant" type often require a large amount of capital reserves as economic support.Whether the design and implementation of financing strategy is reasonable will determine the success of cross-border M&A.However,at present,Chinese listed companies often face many challenges in financing,and domestic and foreign scholars’ research on M&A financing strategies mainly focuses on domestic M&A financing strategies,and there are few researches specifically on "snake swallows elephant" cross-border M&A financing strategies.Therefore,this thesis selects the largest semiconductor cross-border M&A case in my country so far-Wingtech’s acquisition of Nexperia as the case study object,and analyzes the clever financing strategy design behind its sky-high transaction.Listed companies "snake swallows elephant" cross-border M&A financing strategy provides a certain reference.Regarding the definition of "snake swallows elephant" cross-border M&A,this thesis agrees with the view of Chinese scholar Guo Rui,and believes that the acquired company’s main products have a higher international market share and the asset scale index is more than double that of the acquirer,so it can be judged as "snake swallows elephant".The design of financing strategy is mainly based on the theoretical basis of trade-off theory,priority financing theory,and control theory,and considers the influencing factors of "snake swallows elephant" cross-border M&A financing strategy design: after the financing needs of cross-border mergers and acquisitions,the capital structure of the acquirer,payment methods,financing risks and financing policy regulations,finalize decisions on appropriate financing methods and implement them.Based on the two research methods of literature research method and case analysis method,this thesis takes the typical case of Wingtech’s "snake swallows elephant" cross-border acquisition of Nexperia as an example to introduce the basic situation of both parties and the process of merger and acquisition.Then,it conducts an in-depth analysis of the motivations of Wingtech’s cross-border mergers and acquisitions and the implementation of large-scale financing.It is found that Wingtech’s own funds are limited,far from being able to satisfy the "snake swallowing elephant" cross-border M&A funds.In recent years,national policies have been favorable to the semiconductor industry.Wingtech’s share price is likely to rise after the merger,which is easy to attract external high-quality investors.and the financial status and corporate reputation of both parties to the merger and acquisition are good,and they are qualified for debt financing.On the whole,Wingtech can use diversified financing methods to raise sufficient funds to ensure the smooth completion of the merger.In the actual merger and acquisition process,based on the principles of reasonable financing structure,controllable financing risks and reducing financing costs,Wingtech Technology has comprehensively considered the company’s own financial status and equity structure,and adopted a step-by-step merger and acquisition strategy to implement financing in stages.The financing methods of internal source financing,"debt + equity" financing,public issuance of new shares,non-public raising of supporting funds,application for overseas syndicated loans,and issuance of convertible bonds have been used to expand the financing scale of enterprises and reduce financing costs.At the same time,debt was replaced in a timely manner in the later stage of mergers and acquisitions,and various measures were used to hedge and control financing risks.In the end,Wingtech has achieved control of 100%equity of Nexperia.Finally,this thesis draws conclusions based on the previous theoretical basis and specific case analysis:(1)State-owned capital participation enhances the financing efficiency of Wingtech;(2)Wingtech introduces strategic investors through equity financing to optimize its equity structure;(3)Wingtech uses equity to replace debt in a timely manner,effectively alleviating the company’s debt repayment pressure;(4)Wingtech has expanded overseas financing channels with the help of the target company to obtain foreign loans.Based on the conclusions drawn from the aforementioned research,this thesis summarizes some experiences that can be used by other listed companies in my country as a reference: First,companies should actively seek state-owned companies in the "snake swallows elephant" cross-border M&A.Capital support reduces financing time,increases the success rate of financing,and improves the efficiency of mergers and acquisitions.Secondly,companies can combine their own development strategies and introduce appropriate strategic investors when conducting equity financing,which will not only deepen the future cooperation between the two parties,but also optimize the company’s equity structure,so that the company can better resist operating risks.In addition,when designing financing strategies,listed companies in my country need to pay attention to financing risks and strengthen risk control measures.Finally,listed companies should comprehensively use multiple financing methods and actively explore overseas financing channels.If necessary,they can consider using target companies to open up financing channels and improve their financing capabilities.To sum up,this thesis hopes to provide some reference ideas for the design of Chinese listed companies’ "snake swallows elephant" cross-border M&A financing strategy through the research on Wingtech’s financing strategy.