A Study On The Management Buy-out Practice In China

Management Buy-out as a specific way of leveraged buy-out, usually refers to the acquirement of the shares of a target firm by its managers for the purpose of changing the ownership structure and gaining the control of the firm. MBO emerged as a special way of M&A in China in 1990s, and has gained its popularity among especially state-owned enterprise for its unique characteristics in lowering agency cost, facilitating motivation mechanics and enhancing operating performance. MBO also gives clear answer to such question as who really owns a state-owned enterprise, and acts as an efficient way of eliminating the high agency cost in corporate governance.There are four parts of this dissertation: the first part gives a general idea of what is MBO and the current research on MBO issues. The second part give a outline of Chinese MBO from three aspects: buy-out methods, financing constrain and effect to society. The third part covers the pricing and valuation issues in MBO, and give several valuation approaches dominating both in international theories and practice. Then it provides constructive solutions to valuation method with respect to China's situation. The fourth part focuses on the exit mechanisms of capital invested in LBO, and introduces mainly three ways of exit: going public, merger or acquired by another firm and company restructuring.