Managers Leveraged Buyout And Its Applied Research In China

This paper studies the practice of Management buyouts (MBO) in China. The structure of this paper is as follows:We study the theory about MBO in part I . In part II ,we compare the practice of MBO between China and foreign countries and find out some different aspects about MBO in China. In part III, we continue to study the difficult problems about the practice of MBO in China on the basis of part II and give answers to the problems.MBO is the process that the managers can be shareholders by purchasing the share capital. In China, we can learn, through the theory and practice of MBO, that MBO can legally solve at least three problems in the existing structure: First problem is the ownership; second, MBO can also solve the "deputation" problem; final, MBO solve the problem of the managers' motivation.In terms of the practice of MBO, there are several elements should be taken into account: the first is evaluating company should be on the base of inspecting and understanding of the business and finance. There are two objects: one is to make the minimum price of buying; another is to provide the financial restricts for the project.There are a lot of methods of evaluation and these methods can be divided into two catalogs: one is the profitability and capital model; another is net present value of cashflow model.The managers should consider financing after evaluating the company value. Financing can take several forms: such as the individual, borrowing and issuing shares.In addition, during the process of MBO, the managers should avoid the legally risks from civil law, administrative law and criminal law.