A Research On The Choice Of Financing Method And Payment Method In Merger And Acquisition

For an enterprise which has developed to a certain scale, it is inevitably to carry on mergers and acquisitions if it wants to expansion, to occupy more market share, to create a competition advantage. M & A transaction is subjected to property through the transfer of property rights of enterprises and the control of resources reorganization, it is an important way for external expansion of enterprise. With the adjustment of the industrial structure and the driving force for innovation in the enterprise system, M & A is playing a more important role in the capital market. In recent years, the capital markets are very active and the merger and acquisition activities involve almost every industry field, the amount of transactions is growing rapidly, the methods of payment and financing used by the enterprises are also increasingly diversified. After the company has made a decision, the use of the financial instruments to mobilize the resources required by mergers and acquisitions, and the adoption of payment instruments to obtain objective of their assets or equity have become a very important topic.As the major part of the mergers and acquisitions, the choices of methods of financing and payment have a profound impact on the wealth effect and success probability of acquisitions. M & A financing arrangements have a significant impact on the different modalities of financing, financing of the size of the level of financing costs, risk financing and the size of the financing channels open up and clear or not, determine the effectiveness of the merger and acquisition activity even the ultimate success in a great extent. As a form of M & A transactions, acquisition of payment is not only the final step in the M & A, but also a key link of success. Choosing the appropriate payment tool is not only related to the realization of acquisition strategy, but also shows different value information of mergers and acquisitions, then affects the development of integration. The choice of methods of payment is the outcome of the two sides all want to maximize their own interests in the deal, and in a certain extent, this choice is influenced by the mode of financing.Due to special market and legal environment, the financing order and payment method of mergers and acquisitions have some characteristics in China. Financing channels are still limited, development of financing instruments is imperfect, the order of financing preference is different from the Western developed countries, cash is still main payment instrument, new payment instruments are rarely used. This will affect the efficiency and development of corporate mergers and acquisitions. As M & A market developing, it is very significant to do research on the choice of financing and payment method in China.Building a favorable external financing environment and reasonable arrangement for internal financing structure is the direction to financing method in M & A in our country. Corporate can calculate the financial leverage factor to control the debt size and structure in a relatively safe range. With the diversity of finance channels and the completion of share-trading reform, the payment method will become mature and perfect gradually .The success of Lenovo acquired IBM and Tsinghua Tongfang acquired Lu Ying provide two useful cases to study the choice of financing method and payment method in M & A in China.