Leveraged Buyout: Theory And Practice In China

LBO(Leverage Buy-out,referred to as LBO),a special form of enterprise purchase,refers to the behavior that the management of corporate use the loaning capital from banks or investors to purchase the target enterprise and then recompose the corporate in order to get the expected profit to repay the debt.Through this,small efficient enterprises can annex large enterprises.Leveraged Buyout(called LBO), appeared in early 20th century 60's US,was popular in the fourth wave of M&A in America and accelerates the development of the capital market and plays an important role in economic development of America.It is urgent to regulate the economy structure,transform the rising method and enhance the sustaining competitive force,which need the market promotion instead of the singal enterprise.Nowdays more and more LBOs is abstracted by china with the accomplishment of the tow-share reformation and the establishment of the circular market.so,it's of significance to analyse whether LBOs could exist and develop in china where there is'nt market-oriental financing environment and efficient enterprise managementThis paper gives us an general introduction of related concepts of,the background of the leveraged buyout and general operational procedures of leveraged buyout,so we know leveraged buyout as a special form of M & A to some extent; Secondly,through the theory of leveraged buyout and reality analysis on the development of leveraged buyout in our country,the paper interprets the feasibility and inevitability of the development of leverage buyout in China.The part of the theory of leveraged buyout introduces several kinds of economic theories that support leveraged buyout.The part of reality of analysis explains that the conditions of the developement of leveraged buyout in our country have been ripe according to the present situation.Finally,this paper points out the problems of Chinese leveraged buy-out during the course of development,like difficulty of choosing the target enterprise,under-pricing of purchase and that the financing channel and exit mechanism are narrow.On this basis,this paper advances some countermeasures and suggestions for the development of leveraged buyout in China.I hope that the paper can provide some references and enlightenment for the theory and business circles through the studies on the development of leveraged buyout in china.