Management Buyout Financing Problem

As a mature mode of leveraged buyouts,MBO plays an important rolein economic development of many developed countries in Europe andAmerica.MBO has been surging on a 1arge scale since 2001 and becoming aspotlight.MBO requires the dramatic and highly effective capital market,whichis lack in Chinese----the combination with the sufficient capitalamount.Compared with western countries,the reform of finance system andlegal system is 1agged behind the progress of MBO market in China,Including ① the capital market is undeveloped,② there are too manyrestrictions on the issue of bond, ③institute investors are insufficient,④ lackof the withdrawal channel of financing,and so on.So,the fund of MBO hasbeing extremely limited.Furthermore,the financing problem is not only thekey element leads to the success of MBO in China but also leads to the 1argerisks of financial leverage and which further twists management financingconduct. So it can hardly avoid the management to take advantage of assetsand interests of creditors and other stockholders of the targeted company.So,according to development of MBO market in China,financing is becomingbottleneek for the market development.This paper tries to look into the financing practice of MBO ininternational market,compares the differences between financing methods ofwestern countries and that of China . By analyzing Chinese financialenvironment and relative laws,rules & regulations,policies,the paper studiesthe existing financing channel in China and then makes a profound study ofthe current main problems and the ways for innovation of financingapplication of MBO in our country.Furthermore,this paper also analysis thechoice,apply and innovation of those methods in different enterprises,particularly in the state-owned middle & small scale enterprises.