Research On Innovation In M&A Business Of China's Investment Banks

China's economy has been obtained rapid development since the reform and opening, but as a large country with a population of 1.3 billion and sixth-ranking GNP in the world, the number of our enterprises on the list of Fortune 500 is extremely rare, which is as few as Korea, whose population is now merely 47 million. Chinese enterprises are not able to compete with overseas giant counterpart in both size and quality, because they have long been under direct control and administration of the government in the planned economy, thus lacking the competence of realizing capital optimization and restructuring through capital markets.China needs participation of investment banks in recapitalizing hundreds of thousands of enterprises, reactivating trillions of SOEs' debts and savings and reorganizing hundreds of millions of bank credit property. Reformation and strategic restructuring of SOEs has become the top priority of China's current economic reform. It is undeniable that Chinese SOEs have the inherent demand of introducing foreign capital and supports in order to improve the unreasonable system and the low overall economic efficiency, so it is necessary to involve investment banks in M&A, recapitalization, structural optimization and highly efficient capital expansion under market principals.This provides great opportunities for investment banks to achieve cross-industrial, cross-departmental, cross-regional and cross-national recapitalization which SOEs cannot accomplish with their own strength. Investment banks in China, however, as the major M&A promoter of Chinese enterprises, have not yet exerted their active effects on the core operations of M&A. Serving as the most important intermediary in capital markets, investment banks are the organizer and an organic component of market economy and an essential factor in modern financial system, thus they will have a bright future in China. Under the new situations, while capital markets are still undeveloped and investment banks are still immature in China, it is urgent to consider and solve the problem of how to realize the innovation and breakthrough in M&A business of investment banks in China, so as to make more Chinese enterprises rank top Fortune 500.This article consists of six parts: Part One briefly illustrates the background, significance, domestic and foreign research status into this subject, as well as the methodology and innovations of this article.Part Two makes a comprehensive analysis on the involvement of investment banks in M&A (merger and acquisition) from four aspects: motivation of M&A, evaluation of target enterprises, the financial intermediary role of investment banks and effects of their involvement.Part Three firstly introduces the functions and development course of investment banks, then refers to their business structure, and finally elicits M&A as the most important core business of investment banks, together with an expatiation on M&A operations.Part Four emphasizes on analyzing the involvement of investment banks in M&A on four levels between controlling shareholders and small-and-medium shareholders, between the management and shareholders, between government and M&A subjects and between purchasing enterprises and target enterprises. And then presents the current situation and characteristics of M&A business in China's investment banks, furthermore, it points out the problems and deficiencies inside.Part Five demonstrates the necessity and feasibility of innovations in M&A business of Chinese investment banks.Part Six, the last part, discusses how China's investment banks should innovate in M&A business, firstly on macro level, it involves systems and environments reform, and then on micro level, it should involve innovations such as expansion of patterns and manners of M&A.The conclusion is that there will surely emerge internationalized modern investment banks in China, as long as they earnestly analyze and gradually solve the current problems and difficulties, seize the good opportunities, actively develop M&A business, study the experiences and methods of western developed countries and explore diversified M&A patterns and manners. With relentless efforts, we can expect that in the near future, Chinese investment banks will certainly make great achievements in M&A business and outstanding contributions for economic reform and industrial restructuring of China.