| With the rapid development of domestic capital market,leveraged buyout has become an important way of M & A.There are many successful cases of leveraged buyout in China,such as Geely’s acquisition of Volvo,Xiwang Foodstuffs’ s acquisition of Kerr in Canada,etc.Leveraged buyout is an acquisition strategy in which a company uses external financing to obtain a significant portion of the capital it needs to make an acquisition.In a leveraged buyout,a company often uses its future earnings as collateral and expects to pay interest by the cash flow after the acquisition is completed,thus achieving a "snake swallowing an elephant" type of M&A.However,while leveraged buyouts bring huge profits and growth space for enterprises,they also bring high financial costs,debt pressure,and other M&A risks that may often lead to corporate debt crises.Influenced by the macro policy factors of leverage reduction and debt reduction since 2015 and COVID-19 during the past two years,Many enterprises have suffered setbacks in business conditions,liquidity and financing channels,making the risk of corporate debt crisis has increased sharply.This thesis analyzes the "dangers" and "opportunities" in the process of leveraged buyouts with the case of Tianqi Lithium’s debt crisis to provide useful reference for future corporate leveraged buyouts.This thesis reviews the relevant research on LBO and corporate debt crisis at home and abroad,and finds that although there is a rich theoretical foundation,there are few case studies focusing on corporate debt crises after leveraged buyouts,especially the mechanism of corporate debt crisis caused by LBO.Therefore,this thesis selects the typical cases of debt crisis after leveraged buyout,explores the transmission mechanism of debt crisis caused by leveraged buyout,and summarizes the key factors of debt crisis under leveraged buyout of Tianqi Lithium.Based on a literature review of leveraged buyouts and corporate debt crises,this thesis analyzes two important leveraged buyouts and the recent corporate debt crisis of Tianqi Lithium.Then we obtains the following conclusions:(1)leveraged buyouts will significantly increase their risk of falling into debt crisis;(2)the following problems exist in the leveraged acquisition of SQM by Tianqi Lithium,which led the company to fall into a debt crisis: the direct cause is that the debt arrangement is unreasonable and the enterprise has not implemented an effective debt repayment plan,resulting in a large amount of debt maturing centrally;the indirect cause is that high premium transaction and single financing structure made the enterprise over-indebted;the root cause is that the enterprise’s judgment of the market is too optimistic,so that after the industry pattern adjustment,the enterprise’s profitability was insufficient to repay the debt.(3)The rapid development of the new energy industry has led to the recover of Tianqi Lithium from debt crisis,but for those companies in traditional industries,debt crises can still cause a devastating impact and may even lead to corporate bankruptcy.In the end,We also put forward few practical suggestions from the perspectives of enterprises,government and investors respectively,hoping to provide useful suggestions of leveraged acquisitions,to prevent and handle with corporate debt crisis. |
