A Study On The Cross-border M&A Financing Mode Of Private Enterprises

Mergers and acquisitions as a way to enhance the core competitiveness of thefirms have been concerned by more and more people. With the development of theglobal economic, China has been an important part of the world and in which theprivate enterprises are on the way to be the emerging force of the cross-bordermergers and acquisitions.However, to the private enterprises, M&A financing has become an obstacle totheir successful foreign expansion. Such as the insufficient financing, the improperfinancing scale, the improper financing structure and many other factors may result inthe failure of the M&A. Moreover, the mode of the M&A financing may affect thesolvency, the operational capabilities and the profitability, and further to lead thefinancial risks. And yet the legal environment, financial environment and other macrofactors may influence the selection of the M&A financing mode, as well as the microfactors, such as the corporate life cycle, capital structure, the transfer of control power,the motivation of the M&A. Meanwhile automobile industry is capital-intensive,compared to other industries, whose financing scale is great when it comes to the M&A. Rather than the state enterprises and the foreign-capital enterprises, the privatelyowned car firms are in a more awkward position, whose survival, development andfinance including the M&A financing need to be concerned.Geely, China’s first privately-owned car firms, whose development and financingis similar to the other privately-owned car firms. And so we take Geely as the casestudy object to research the M&A financing. This paper tries to strip out and explorethe main mode of the overseas M&A financing to avoid the traps and optimize thecapital structure by analysing the influence factors of the mode of the overseas M&Afinancing and the changes of the solvency, the operational capabilities and theprofitability have taken place after the M&A.This paper is divided into six chapters, in which the first chapter summarizes thebackground, significance of the research and overview the content of the research.Secondly, the next chapter will review the theory and literature of the M&Afinancing which includes the theoretical basis of cross-border M&A, the M&Afinancing and the relationship between the M&A financing and businessperformance. Then the third chapter describes the factors of the M&A financing which incorporates the macro factors, such as the legal environment, financialenvironment and the micro factors, such as corporate life cycle, capital structure, thetransfer of control power, the motivation of the M&A. Chapters II and III are takenas a theoretical basis of the paper, which are focused by the part of case study, and thechapters IV and V are the focus of the whole paper. The fourth chapter describes thecurrent status of the development and financing of the privately-owned car firms. Toreveal the problems of the financing and the M&A financing of the privately-ownedcar firms, the SWOT analytic method will be used and the statue of the financing ofthe privately-owned car firms will be analysed in such three parts: the source of fund,refinancing and the M&A financing. The chapter five deeply analyse the M&A casebetween Geely and Volvo. Finally, the Chapter VI makes recommendations to the M&A financing of the private enterprises on the base of the case study, which isconsisted by the use of internal capital markets, the strategic alliances and thefinancial innovation.