The Private Equity Mode Of Small And Medium-size Food Enterprise In China

The food industry is the vital industry in our life, which is closely related withpeople’s life. Since China introduced reform and opening policies, Chinese foodindustry has been increasing at a fairly high rate. It not only contents all of materialrequisite for us, but also ensures foodstuff’s stationary and developing. However, thereare some problems in food enterprise developing. Financial matter is a big trouble forfood factory, especially for small and medium-size food enterprise. Small andmedium-sized enterprises credit guarantee is very weak and the bank don’t like to lendmoney for them. Fortunately, The Private Equity is a new way for small andmedium-sized enterprises. It provides more help for small and medium-sized enterprisesdeveloping[1].With the rapid development of private equity financing, small and medium-sizedenterprises more and more choices introduce private equity financing to solve thefinancing difficulties in the development. Small and medium-sized food enterprises asan important traditional industry, it is different from other enterprise. So small andmedium-sized food enterprise private equity financing is a concern of this paper. Privateequity financing can help small and medium-sized enterprises to obtain betterdevelopment.This paper is divided into five parts to discuss the private equity financingproblems of small and medium-sized food enterprise.The first part of this articleintroduces the research background, purposes and present condition of both inside andoutside China. Various research methods of social sciences are used in this paper,including case analysis method and case study and comparative analysis as well asqualitative and quantitative ways. At this part we discuss the process and the key problems of the private equity financing. We hoped our research could provide someinstruction for small and medium-size food enterprise to use the private equityfinancing.The basic theory for the private equity financing and the small and medium-sizedfood enterprise are presented in this chapter. Firstly this paper introduces the definitionof medium and small enterprises in China and the division of the standard for mediumand small enterprises. And then analyzes the small and medium-sized enterprises inChina’s overall current situation and cause the financing for the current situation. Andthen analysis of food enterprise financing difficulties of small and medium-sized andfind new ways to solve the financing difficulties of small and medium-sized enterprises,one of those is the private equity financing. In the final part we analysis the presentsituation of the private equity financing in our country and in small and medium-sizedfood industry.The third part of this article shows the operation mechanism of the private equityfinancing for small and medium food enterprise. First introduction is the step of thesmall and medium-sized food enterprise’s private equity financing. At the same time wediscuss the preparation of small and medium enterprise financing and other importantquestion (such as Business Valuation and due diligence). Then we discuss the keyproblems in the process of enterprise private equity financing--Business Valuation. Inthis part we have compared the cost method, cash flow of the discount method andoption method to find the advantages and disadvantages of those methods. According tothe characteristics of small and medium-sized food companies, we choose the suitablemethod to evaluate the value of small and medium-sized food companies in the processof private equity financing.The fourth chapter of the article is to discuss the benefit and risk of the privateequity financing for small and medium food enterprise. This chapter is also the focus ofthis chapter. Private equity financing not only provides financial support for small andmedium enterprises but also help small and medium-sized food enterprises to improve their governance structure of the company, make small and medium-sized foodenterprises to obtain better development opportunities. The second part of this chapteranalysise the financial data for small and medium-sized food companies. It proved theimportance of private equity financing for small and medium-sized food enterprise. Theprivate equity financing have positive function for the small and medium-sizedenterprises, but it also has risk to introduce private equity financing for small andmedium-sized enterprise. So, small and medium-sized food enterprises should pay moreattention to the risk of private equity financing.The last part of the article is the conclusion and suggestion. In view of the abovethe chapters, this part summarizes the problems in the article and to put forward someSuggestions.