Research On The Pricing And Financing Of Management Buy-outs In China

Management Buy-outs (MBO) has been paid more and more attention since its introduce from foreign country at the end of 20th century, and has been related to the innovation of property right of state-enterprise. Because MBO has so many advantages such as reducing agency cost, inspiriting management, adjusting capital structure and improving operating performance.This thesis takes for that the former foreign MBO theory—the Efficiency Increase Theory and the Wealthy Transfer Theory—have not explained dual character which the MBO in transitional country bear specially. So, this thesis puts forward an extended MBO theory , which suggests that the key to success of MBO is to enhance the level of investors protection and to achieve the Efficiency Increase MBO. And problems of pricing and financing during MBO become the entry of enhancing the level of investors protection.Refering to the pricing of MBO, this thesis takes for that it's inconsequential to make net assets value per share as sole standard of pricing, and the standard of valuing must be traced back to free cash flow, and Free Cash Flow Valuation must be set up for pricing. And this thesis has brought EVA theory into MBO pricing to quantitating former contribution of management. Moreover, this thesis analyses controlling premium and marketability discount, and considers that we must develop the mechanism of market to improve the level of investors protection.In researching the financing of MBO, this thesis analysed problems met in financing from commercial bank, stockjobber, insurance agent and Trusteeship corporation and financing by issuing bond. It suggests that the solution of financing not only needs supports of laws and policies, but also needs innovation of ways of financing. MBO fund may be a great resource of financing to some extent because of its large scale, high marketablity and high prospective benefits. Furthermore, it tables a proposal that we can consider a transitional financing model, and government should set up a trust system to help MBO financing.