Changyu Mbo Case Studies

Mike Wright, an economist of UK gave the official definition of the phenomenon of management buy-outs (MBO) in 1980.It has been proved by the western practice that MBOS has played an active role in the aspects of increasing internal motivation, decreasing agency cost as well as improving a company operational performance and managerial capabilities. That is why it has been widely applied. The MBO is usually used by foreign listed companies in business divestiture, spin-off, anti-hostile acquisition, as well as by diversified parent companies when in need for raising cash in order to avoid financial crisis or to divest their subsidiaries. Therefore it is purely market-oriented.In the current period, the most notable significance of MBO in China is to push the ownership system reform. Currently, special attentions must be paid on solving four problems about MBO: the determination of acquisition subject, financing, pricing, equity structure and scientific corporate governance.Based on discussions of cases of KKR acquiring Houdaille and changyu Group, this paper conducts comparative detailed analysis on MBO from perspectives of acquiring objectives, financing arrangement, business integration and capital exit. It identifies the difference of MBOs in China and those in developed markets at present. In china MBO is more like an way to encourage management than to reduce agent cost; illegal financing channel causes latency problem for future operation; management members make advantage of so-called "internal people control" to undervalue the share price that damage the interests of the middle-and-little share holders; management members also obtain large proportion dividend from the company that limits its development.　It is clear that the common models of MBO in overseas security markets cannot be transferred to Chinese security market entirely. As an acquisition approach and a systemic innovation, MBO is just at its beginning stage. Thus, the further development entails legislatures and their perfecting and further regulating...