SINA Management-buyouts Case Analysis

Management-buyouts (MBO), which originated in the West in1970s-1980s,was firstproposed by a British man named Mike Wright, refers to the target corporatemanagement through the purchase of shares in the target corporate, to change theownership of the target corporate, the structure of control right and the asset structure,thereby to achieve the propose of restructuring the target corporate, controlling orsubstantial controlling the target corporate (for a listed company companied withprivacy to be a private company), it concerns to enhance the value of the targetcorporate to gain the expected return. It can be said that MBO is one kind of enterprisemerger and acquisition (M&A), and belongs to the LBO. Over the past30years, China’seconomic development has made attract worldwide attention, and its GDP achieved to51,900billion Yuan in2012from just30,070billion Yuan in2008, after the outbreak ofthe global financial crisis, China was even called as the global engine of globaleconomic recovery. Many scholars believe that, China’s rapid economic developmentand the series of domestic reforms are inseparable, and MBO plays an important role inthese reforms, that is to say China’s MBO is raised in this reform. The reform oftownship enterprises’ cooperative in the1990s is the original of MBO of our country,and then small state-owned enterprises and local township enterprises began to sellcompanies spontaneously. Till the late1990s, some enterprises began to adopt the policyof concentrate proper equity to the management to break the average ownership pattern,to realize the management holding situation. After twenty-first Century, MBO began touse in the large and medium-sized state-owned enterprises, and appeared in thestate-owned listed companies. The implementation of the " management approach oflisting Corporation buyout " and " management approach of listing Corporationdisclosure of shareholder equity changes " in2002promoted the improvement of MBOin listed companies of A share market, and this two management approaches caused arapid development of domestic MBO, so that MBO has become an advanced way of thereform of property right, and is carrying the institutional mission of the reform ofstate-owned enterprises, and the institutional mission of management incentive. Butthere’s still a lot of problems exist, such as the uncompleted reform, the imperfect legalsystem and market system and regulatory problems, MBO in the actual operationprocess, information disclosure and other aspects are getting more and more serious. Even caused the serious loss of state-owned assets, so there’s an opinion that MBO inChina is like the "wealth transfer" theory, Argues about MBO has intensified. Comparedwith the MBO in China, MBO originated in the west is mostly showed "fortune added"results, for many enterprises, to choose MBO is a good strategy. Therefore, manyscholars explore the differences between Chinese and Western MBO, even somescholars proposed our country enterprise will show differently if we can have the samelisted environment with western.We first summarized the results of MBO both domestically and abroad in this paper,including MBO acquisition characteristics, acquisition mode selection, financing,pricing, information disclosure and regulatory issues in the acquisition process, andeconomic consequences after the acquisition. The study found that the MBO generallyoccurs in the traditional industry mature enterprises that have the following characters:have a relatively stable cash flow, have great management to enhance the efficiency ofoperation, and the management of the corporate are more familiar with their business, alonger term positions, greater contribution; there are different modes of acquisition inChina and abroad during the acquisition process, in the west, MBO usuallyaccompanied by listed company’s exit the stock market temporary. And then list againafterwards, in the domestic, however, the target company didn’t delist from the stockmarket, the emphasis is the behavior to buy shares of the company by management, andthe main subject of acquisition is extended to the company’s middle managers and eventhe company’s employees; at the same time, in terms of financing, due to the limits ofcompanies financing with their own shares, the financing channel is narrow in China,and the pricing arrangements are often based on the net assets of the enterprise, thesewill inevitably lead the management to damage the overall interests of the company fortheir own interests, therefore the transaction price is always too low, it is not asreasonable as public bidding which is adopted by the foreign countries; in addition, withthe special of China’s social nature and the types of economic, the system specificationof market economy and market behavior is not perfect, there are many loopholes ininformation disclosure and regulatory issues in MBO process.According to the particularity of the development of MBO in China, this paperproposes that can enterprises in China under the foreign regulatory environment achievethe same effect as foreign enterprises? we choose SINA as the research object whichbelongs to the high-tech industry and listed in NASDAQ in the USA, we study thereports and data from CSMAR using event analysis method and principal component analysis (PCA), after the analysis of the SINA company MBO’s market performanceand the economic consequences after the acquisition, we found that: even as SINAlisted in the NASDAQ constraint by American regulatory system, MBO has not beenable to achieve to enhance the company’s performance and long-term incentive effectunder the Chinese economic system environment. Therefore, we believe that, if wedon’t complete MBO issues from the following aspects: the acquisition of the subjectqualification, target selection, financing behavior, pricing mechanism, the managementbehavior constraints and market supervision system improvement, but just improvefrom one aspect, MBO cannot achieve its optimal effect.