Research On The Motivation And Value Creation Of The "State-owned Capital+PE" Equity Investment

The initial investment mode of private equity fund investment("PE" for short)is equity participation investment,which refers to the fund that is set up for the purpose of withdrawing profits by privately raising funds from specific investors,making equity investments in unlisted enterprises in the form of contracts,partnerships or companies.However,with the gradual maturity and evolution of China’s capital market,PE investment models are becoming more and more diversified.Two PE investment models that have attracted more attention in academia have evolved from the above conventional PE equity participation investment model,namely PE holding investment and "listed company+PE" M&A model.Different from the above two models,this paper studies the "state-owned capital+PE" investment model,That is,the investment mode of cooperation between state-owned capital investment and operation companies and PE.Compared with the general PE holding investment,PE institutions in the "state-owned capital+PE" investment model do not independently carry out relevant equity investment,but cooperate with state-owned capital,and the leader is state-owned capital;Compared with the "listed company+PE" investment model,the nature of state-owned capital investment and operation companies is different from that of listed companies.It is a state-owned asset operation platform with financial attributes.It has many companies and a wider business scope.At present,the academic research on this investment model is still insufficient,the domestic related theoretical research is less,and the actual application is not mature."State owned capital+PE" equity investment is a new equity investment model that conforms to China’s national conditions and systems.In order to explore its causes,manifestations and development potential,this paper selects the case of Wuhan Financial Holding Holding Hangjin Technology Company for analysis,and deeply discusses the operation mode,motivation and value creation mechanism of "state-owned capital+PE" holding Hangjin Technology Company in the holding process,in order to answer why state-owned capital should cooperate with PE institutions for equity investment? How does this investment model help the state-owned capital to achieve shareholding? How to create value in the process of holding?This paper introduces the case of Wuhan Financial Holding Holding Hangjin Technology Company,clarifies the relationship between Wuhan Financial Holding,Shengda Ruifeng and Hangjin Technology Company,and identifies the case as "state-owned capital+PE" investment model.In the motivation analysis,from the perspective of Wuhan Financial Holding,the leading player,this paper specifically analyzes why Wuhan Financial Holding chose to control Hangjin Technology Company and why it controlled through the "state-owned capital+PE" investment model.In the analysis of value creation,this paper discusses the mechanism of value creation from three perspectives: private equity fund,state-owned capital and target company,evaluates the value creation of Hangjin Technology Company in a quantitative way,including short-term market effect and long-term performance,and evaluates the value of Hangjin Technology Company with EVA valuation model.Through the case study of this paper,it is found that:(1)state-owned capital and PE institutions jointly manage the target company,and PE institutions hold the shares on behalf of the target company,so that the target company can conduct performance cultivation and strategic transformation outside the state-owned capital,and merge into the state-owned capital after the cultivation is mature.(2)The reason why Wuhan Financial Holding uses PE to hold Hangjin Technology Company is to obtain a capital operation platform,obtain a professional team,solve financial problems and master the governance right of Hangjin Technology Company.(3)The "state-owned capital+PE" investment model can achieve multi win.In terms of private equity funds,private equity fund participants not only locked the exit mode in advance,but also enjoyed rising returns in the process of holding the shares of Hangjin Technology Company for a long time;As for the target company,Hangjin Technology Company has obtained excess returns in terms of short-term market effect and long-term market reaction,bringing wealth appreciation benefits to shareholders.In addition,Hangjin Technology Company has improved its profitability and profit quality through diversified transformation.In terms of state-owned capital,it has not only obtained high interest income,but also controlled a successful transformation of a listed company with strategic value in the chip field.The main contributions of this paper are as follows:(1)It expands the research on PE investment mode in China,and enriches the relevant literature on PE’s operation mode,motivation,value creation,etc.It enriches the theoretical research on the operation mode of state-owned capital.(2)Through in-depth and thorough analysis of the whole process of the case,PE institutions have been injected with new investment ideas,investment models and profit making ways,which can improve the investment quality of private equity investment in China.At the same time,it also enriches the operation mode of state-owned capital investment and operation companies to realize their strategic industrial investment.(3)This paper puts forward suggestions from the level of state-owned capital,PE institutions and regulators to control the risks of the investment model,improve the operation quality of private equity investment in China,and promote state-owned capital investment and operation companies to achieve their strategic investment goals.