Research On The Financial Function And Practical Operation Of Management Buy-outs

Management Buy-outs (MBO) refers to buying the company's shares by the managements for the purpose of changing its ownership structure, power of control structure and the assets structure, thereby restructuring the company and obtaining expected returns from the investment. With the rapid reform process on the state-owned enterprises, more and more companies are implementing MBO progressively in clearing the property right and strengthening the incentive. MBO is favorable to adjusting the enterprise structure and integrating the business. What's more, it can decrease the agent costs while increase the management profits of the enterprise. Based on the theory of MBO, this paper discusses its functions and the existing problems during its operation process from the perspective of finance, and finally puts forward some suggestions in terms of the case analysis.At first, this paper presents the basic system content of MBO, including the concept, the historical developments and the theoretical foundations, and also renders its realistic significance in our country. Second, after a detailed contrast, the paper concludes that MBO has stronger incentive and better property right reform effect than the other measures. At present, compared with the strategies of developed countries, domestic MBO practice has obvious phase characteristics, MBO in our country is mainly solving enterprise property right and incentive problems. Third, as a kind of rule arrangement innovation, MBO must have certain functional utilities. On the basis of MBO financial theory, the paper proposes that MBO has three kinds of financial functions such as financing, resources equipment and interests distribution. Giving full play to financial functions will contribute to improving the value of the whole enterprise and society, and realizing the rational resources equipment. Since the capital market is undeveloped at present in our country, the legal environment and financial market is not perfect, there are some problems in practical operation of MBO: the pricing of targeted company is unreasonable; the financing sources are on the obstacle; and high dividend distribution after MBO still exists. At the end, the paper analyzes the above-mentioned problems separately concerning the actual conditions of our country.