The Research On The Business Valuation Of Private Equity Investment In Our Country

With China’s rapid economic development, the global PE investment funds areconstantly flocking into China, and from all levels of penetration into the Chinesemarket, while the2010can be said that the banner year of the Chinese PE investmentmarket, after the impact of financial crisis in2008, the fund raising and investmentdownturn of2009, the Chinese PE market rebounded strongly in2010. It is significantto develop China’s PE industry to broaden our investment and financing channels, toachieve financial sector reform of breakthrough and to meet international challenges.From the venture capital which give the birth to small business, to the M&A fundswhich integrate the industry, and even sell their own shares for public financing,private equity can be said to have been to mature, while the influence to business,industry and even to a country’s economy is also growing. In the United States,90percent of all high-tech enterprises developed by early form of private equity ofventure capital investment model.In China, private equity has developed a largenumber of well-known enterprises such as Sina, Mengniu and Suntech,etc. As animportant part of capital market, private equity market provides the necessary capitaland management support for the development and growth of enterprises.Nevertheless, the industry in China is still in a period of development, therelevant theoretical and practical studies have many deficiencies. Therefore, itsignificant and valuable to major in PE studies, especially the business valuation,which is the important aspect of industry. This article is in research of PE investmentfrom a practical level, aim at the business valuation situation of PE investment inChina, discuss the application and the lack of the variety of business valuationmethods in PE investments, put forward a valuation model based on evidence,broaden the methods and ideas of business valuation in PE investment to improvethe scientific and rationality of enterprise valuation in PE investment.The main content of the article is divided into three parts. The first part is anoverview of relevant theory of the private equity and the theory of value for PEinvestment analysis and commentary. The second part is the analysis of the status quoof assessment of enterprise value in the PE investment, describes the deficiencies inactual use and proposes a new model of business valuation in empirical methods. Thethird part is the practical application of real option method and the new model of business valuation. The article mainly uses the combination methods of standardresearch and empirical research, including classification analysis, comparativeanalysis and qualitative and quantitative methods.Through this study, we found that we should use appropriate methods to evaluateenterprise value of private equity investment according to the actual situation. Weshould give enough attention to the real option method used in PE investment, whilethe empirical method in this paper quantifies the numbers of factors which affect thevaluation, obtains linear model of business valuation, enrich our corporate valuationmethods in private equity investment. This paper focuses on the business valuationissues in PE investment, I hope these findings can make reference for privateinvestment institutions to make regulative, comprehensive, scientific investmentdecisions, improve investment quality and reduce investment risks.