Research On Risk Management Of Valuation Adjustment Mechanism In Private Equity Investment

With the development of the economy,the financing methods of enterprises are becoming more and more diversified,and more and more enterprises choose private equity investment for financing.But in the private equity investment,both of the investors and financiers can not make the accurate forecast about the future performance of the financing enterprise.Therefore,in order to overcome the information asymmetry between the investors and financiers and reduce the risk of investment,VAM is introduced in private equity investment to adjust the relationship between rights and obligations after investment.In practice.Although the VAM plays a positive role,for both of the investors and financiers,they should pay attention to the risk of using the VAM,how to manage the risk effectively and reduce the risk is also very important.This paper adopts the methods of case analysis,comparative analysis and quantitative analysis,through the theoretical analysis and case studies,and on the basis of in-depth research on the theory of VAM,this paper makes a detailed analysis of the current situation,characteristics and risks of the application of VAM in the private equity investment in China.By enumerating the examples of the application of VAM in private equity investment in China,this paper introduces the current situation of the application of VAM,summarizes the characteristics of the application of VAM in private equity investment,and summarizes the common risk types of private equity investment in China from the three different stages,including signed before,during and after.Then the paper introduces two classic cases about the application of VAM,that is,Yongle bet against Morgan Stanley and China trend bet against Morgan Stanley.And the paper gives a detailed description about the background of the case,the reasons why the financier signed the VAM,the main contents of the VAM and the risk of using the VAM.Finally,according to the three different stages,including signed before,during and after,this paper puts forward in detail about the concrete measures of how to prevent the risk when using the VAM in private equity investment,which provides valuable reference for both of the investors and financiers.Specifically,before the signing of the VAM,the investors should do a good job of due diligence,and the financiers should evaluate the necessity and feasibility of signing the VAM.When a VAM is signed,the investor shall carefully choose the main body of the bet.And according to the actual needs,make reasonable use of and set up the share repurchase clause,the anti-dilution clause,the priority clause and the one-vote veto clause,so as to fully protect their investment interests and reduce the investment risk.The financier needs to evaluate the enterprise's own value and set the gambling standard reasonably,set up the repeated game structure and make full use of the guarantee clauses to reduce the risk brought by signing the VAM.After the signing of the VAM,the investors and financiers should establish a strategic cooperative relationship,the investors should also grasp the exit opportunity reasonably,the financiers should enhance the core competitiveness of their enterprises,and avoid short-term behavior.