The Research Of Value Creation In Leverage Buyout

M&A, one of the effective methods for recourse integration, had been animportant role in world economy development. In every economy circle,there must be the need for enterprise and financial intermediate. There werefive M&A waves in the history, Leverage buyout, as a special effectivecapital usage way, dated from the fourth M&A wave, and applied worldwidein the following M&A cases. This was because of global integration,financial deregulation, capital market completion and enterprise development.In China, M&A was happened after1990and developed fast after2000,which was because the business model of enterprise has shifted from simplycreated value by using the labor advantage to resource integration by M&Aand financial method. LBO will grow in the near future with the deregulationof finance market and creation of finance tools. But for the research of LBO,most of domestic professors still stay in the research of history of LBO,construction and operations of it, but the research on real reason of valuecreation for LBO is still in the blank in research field. The paper was presented in the following structure: first, it gave anoutlook of M&A and LBO development in the history, then analyzed theprinciple, financial structure of LBO, operations after M&A, criteria ofobjectives. In the second part, the financial analysis was arranged to analyzethe value creation in the whole process, decomposing the value creation toleverage effect, EBITDA effect, FCF effect and Multiple Effect, anddepicted this process in a real case. In the third part, the paper was focused onLBO development in China, analyzing obstacle and giving suggestions for it.The innovation of the paper was using Dupont analysis to design financialmodel to decompose value creation of LBO, helping the reader to betterunderstand the whole process, and better operate in their practice.