The Practice And The Legal Risk Prevention Of VAM

In recent years, Valuation Adjustment Mechanism (VAM) has appeared frequently in the acquisition of many important cases, such as the signed VAM between Morgan Stanley, Dinghui Investment and the Yongle,between Warburg Pincus and Harbour Networks, between Goldman Sachs, Ding Hui Investment and the Singapore PVP and the Yurun Food, between Morgan Stanley, Dinghui Investment, Actis and the Mengniu , between Morgan Stanley, Actis and Goldman Sachs and Hunan Prince Milk, between Nikko Cordial and the Happy People Pharmacies and so on. The VAM has become a hot topic in the international investment community and the Chinese business community. At present the VAM is in use as an investment tool, and at the same time it is also a very important document in the legal practical operations. The content of the VAM includes the traditional area of the law of the domestic sectors such as the Civil Law and the Company Law, the traditional area of international law such as International Investment Law and International Private Law and a certain degree of the emerging area of laws such as International Financial Law, International Securities Law and so on. In this sense, the VAM is the leading issue on the legal studies.In addition to the introduction and the conclusion, this paper is divided into four sections as follows.The first chapter introduces the meaning and the characteristics of VAM and analyses the applicable scope. This part, through the analysis of the accurate name and some scholar's different interpretations of the concept of VAM, draws the conclusion that VAM is a valuation adjustment of financing covenant. VAM can be used in a lot of field.The second chapter makes legal analysis of VAM.This part ,from the perspective of laws, explores the legal nature of VAM , pointing out that the legal nature of VAM and the contract-fortunate are similar .And then this section launches the legitimacy of VAM under chinese law.The third chapter discusses the Practice and Application of VAM.First, it discusses the mature approaches of VAM in the international capital markets.Second, it analyses the legal obstacles in the implementation in our country. And then it explores the operation mode of using the offshore companies to implement VAM. Finally it makes the in-depth analysis on the Mengniu Diary which is the earliest and the most successful company in the implementation of VAM in domestic enterprises.The fourth chapter discusses the possible legal risks of macroeconomic policies and micro-operations when signing VAM and gives the specific responses. This part helps enterprises to assess the legal risks, makes the according terms about VAM, understands and overcomes the trap in the VAM.Finally some points of the views that the author believes in are as follows. Firstly, the VAM is not suitable for all enterprises, and not all financing need to sign the VAM. Secondly the financing enterprises must consider comprehensively the legal risks of the macroeconomic policies and the operational levels. Design sustainable terms to ensure the control of the enterprises. Thirdly, even though successful in the gambling, the enterprises must be careful, because most of the investors are international financial ones while their final goal is to cash out. Therefore, the long-term development of the enterprises should mainly depend on constantly enhancing their management level to enforce the competitiveness.