Research On Valuation And Financing Of MBO In China

In 1990s, MBO, as a specific of M&A., has been come into being in China, because of it obvious advantage in lowering agency cost, facilitating motivation mechanics and promoting operation performance.MBO is a buy-outs action that in order to reorganize their own company and acquire anticipated benefits, the management of the target company buy the shares of their own company by debiting and crediting the financed capital to change the structures of ownership, control power and assets. In China, firstly, MBO solves ownership issue, prevents state-owned assets from draining and makes the enterprise have true owners; secondly, it eliminates principle-agent cost which bothers states-owned-enterprises for quite a long time and improves running benefits of enterprise; thirdly, it makes ownership and managing power unite completely, which on the one hand embodies the value of human capital, on the other hand meets the requirements of long-term in motivation system of enterprises.The full paper divides into three parts mainly.In the first part, the author described the development of MBO in China, compared the different of MBO in China and in western countries, analyzed MBO situations in China and points out its problems.In the second part, the author introduced three methods of valuation, analyzed situations of valuation in China and proposed two new mechanisms of valuation.In the third part, the author summarized and analyzed of the financing ways of MBO and the management of financing ways of MBOWith the development of market economy and improvement in laws and regulations, MBO is believed to flourish in China with characteristics unique to Chinese market. It could be one of the ways for state asset to bow out of the state-owned enterprises. Meanwhile privately owned enterprises might become the first and later the main stream undertakers of MBO.