Application Research Of LBO In China Merger&Acquisition Activities

With the development of Chinese capital market, mergers andacquisitions activities among Chinese companies arise tremendously. Asa creative form of corporation mergers and acquisitions, leveragedbuyouts (LBO)attract more and more attention in China，and willdefinitely play an increasingly important role on China’s capital market.This thesis first introduces the theoretical basis of the LBO, andanalyzes the development of leveraged buyouts on both domestic andinternational markets. Then, this thesis conducts in-depth comparativeanalysis among three classical LBO cases, and concludes with thedifferences between the domestic and international LBO markets, withMBO being the most common LBO type in China. Thereafter, this thesisanalyzes the feasibility and influence of LBO execution in China from thefinancial and legal perspective, coming up with the potential risks in thesame time.Finally, I make thorough research on M&A loans of commercialbanks risk management guidelines released by the China BankingRegulatory Commission in May2008, and The guide lines of furtherimproving the financial services to support key industries and inhibit the problem of excess capacity in some industries co-issued by the People’sBank of China, China Banking Regulatory Commission, China SecuritiesRegulatory Commission and China Insurance Regulatory Commission inDecember2009and find that the future development of the leveragedbuyout financing channels will be greatly supported by favorable policies,especially through banking, trust and LBO funds. In addition, I collectand study the public information and data of domestic leveraged buyoutscases, coming up with the specific model of leveraged buyouts throughbanks, trust and LBO funds, as well as suggestions to fight againstpotential risks. With a view to preventing potential risks to some extent，the suggestions include: to establish sound and perfect laws andregulations to be more supportive for LBO, to optimize the valuationmethods, to broaden the financing channels, to implement financial riskcontrol mechanism and to enhance the ability and professionalism ofintermediaries, etc., which shall play a significant role not only from thecapital market point of view, but also from the realistic demands of theChina enterprises in their growth path.