Research On Private Equity Financing Of JIDA Company Limited

Along with the tide of reform and opening up, great changes have taken place inscience and technology industry in universities. The function of school-runenterprises is changed from the early student internship places, into the importantplace to promote the transformation and industrialization of scientific andtechnological achievements in universities. In2005, the Ministry of Educationissued "guidance on actively development, standardize the management of Universityscience and technology industry ", and pointed out the direction for the futuredevelopment of school-run enterprises, and laid a solid foundation. At the sametime, it brings an important problem which is how to carry out diversified financing,and provide enough power for the development of enterprises.Private equity financing comes from the United States, in recent years, in thehigh-speed developed capital market, it also led to the rapid development of China’sprivate equity market. Along with the expansion of private equity investment andinvestment scope, investment shows the diversification, and small and medium-sizedenterprises of high quality gradually become the main force of private equityfinancing. Compared with other financing ways, qualifications of private equityfinancing are less, operation mode is more flexible, and the speed of money is alsofaster. For the financing enterprises, they can implement financing projects muchquickly. Private equity financing generally includes employing private advisers,combing the enterprises’ value, designing financing schemes, selecting privateinvestors, investment due diligence, bargaining negotiations, signing and exiting links.Every link may exist uncertainty, eventually lead to failure. Therefore, the design of private equity financing is very important for the financing process which may causesuccess or failure.JIDA Company Limited, founded in1981, and the predecessor of it is aschool-run enterprises. In2010, after the completion of shareholding system reform,the registered capital of it is10million RMB, in which state-owned shares accountedfor30%of the total equity, the natural person shares accounted for70%of totalequity. As a domestic professional communications service providers, the companyhas always focused on communication technology services business, and committedto provide basic telecom operators and communications equipment supplierscomprehensive technical services which include the communication network forsurvey, design, construction, maintenance and optimization of core network,transmission network, supporting network and etc.. In order to ensure the quality ofservice and serve customers better, the company decided to implement the projects oftechnology center modification and services network optimization, and purchase abatch of research equipment and test equipment. The project will effectively meet thecompany’s demands for space in future for rapid growth of research scale, businessscale and personnel scale, improve the company’s core competitiveness, and responseactively to communication operators’ service requirements which is “full coverage,full regional”. However, there will be a financing gap if the company implements theproject depends on its own funds. So the company should get financial support fromexternal enterprises. In many ways of financing, the way of private equity financing ismore suitable for this company. Firstly, private equity financing is low barriers toentry, as long as the two financing sides reach an agreement according to their ownneeds, the company will obtain the corresponding funds; Secondly, private equityfinancing is the enterprise to sell some stock rights to investors for funds, comparedwith the debt financing, the short-term debt pressure is small; Finally, the entry ofprivate investors could improve the company’s governance structure, and the company’s intrinsic value. Certainly there is some private equity financing riskswhich should be considered, such as industry risk, audit risk, macroeconomicregulation and control risk, etc.In this dissertation, I make a practical and feasible financing solution for JIDACompany Limited, according to the actual situation of the company. Through the wayof comparing and discount cash flow which appraises the value of JIDA CompanyLimited,, in accordance with10RMB for one share, the company should sell1.5million shares and3.5million shares to university and private equity investor, andraise50million RMB. After the financing, private investors will account for6.93%oftotal equity. In order to ensure the smooth implementation of financing, thisdissertation will also put forward some key points of the project and safeguardmeasures.