Research On The Application Of Directional Convertible Bond In M&A Payment

In order to expand and grow,companies will engage in M&A activities.The M&A payment method is one of the most critical aspects of the M&A process,and the payment method in China’s M&A and restructuring market has always been single.In order to encourage M&A restructuring and broaden the financing channels for M&A restructuring,on 1 November2018,the SFC piloted directional convertible bonds to support the development of listed companies,providing a new financing method.RACO,as a successful case of using directional convertible bonds for M&A restructuring at the early stage of the pilot,can provide certain reference for enterprises preparing to adopt directional convertible bonds for M&A restructuring in the future.The thesis adopts the literature research method and the case study method to analyse and study the case of RACO’s merger and acquisition of Hengda Microwave.Firstly,a large amount of literature was reviewed,and the relevant literature was summarised and collated to provide the corresponding methodological and theoretical basis for the analysis of the case: backdoor equity theory,stage financing theory,financing priority theory,and incomplete contract theory.This is followed by a detailed introduction to the case: including the parties to the M&A transaction,the motivation for the M&A,the transaction plan and process,and the terms and conditions related to convertible bonds.Finally,it analyzes the key terms of the directional convertible bond used in the M&A payment,the influence of the directional convertible bond on investment and financing,and the advantages and risks of adding the directional convertible bond in the M&A payment,as well as the risk coping.After the analysis,the corresponding Enlightenment and reference are drawn: including the M&A side,the investor side and the regulatory sector.Based on the above research and analysis,the conclusions are as follows:(1)The consideration of M&A by RACO is comprehensive,including itself,M&A target and macro-economic environment.(2)The application of directional convertible bond in RACO plays a buffer role in the follow-up financing and investment activities,and increases the space of follow-up financing.(3)The flexible terms of RACO’s oriented convertible bond can effectively deal with risks,meet the needs of both sides of M&A,and increase the flexibility of M&A negotiation.