Research On The Performance Of Subsidiary Company Following Equity Carve-out In Growth Enterprise Market

For a long time, mergers and acquisitions are frequently adopted by many companies as an important means to expansion of capital operation. Transnational merger and acquisition was once boomed. The expansion of the restructuring not only brings advantages for the enterprise, but also brings a range of associated problems. Thus, came into the shrinkage capital operation is that equity carve-out.As the restrictions of equity carve-out within the Main Board, the units can only IPO in Hong Kong or overseas board, the domestic market has only few cases of equity carve-outs. China launched the Growth Enterprise Market (GEM) in2009, and then six months later the six basic conditions for the equity carve-out of domestic listed companies were released by the SFC. The enthusiasm of the investment market was re-detonated by the six basic conditions. At the beginning of2011, the first case that the subsidiary of one A-share listed companies was listed in the GEM successfully occurred, which was the equity carve-out of Zhejiang Conba Pharmaceutical Co.,Ltd. With the market matures,as well as its high risk and high profitability and the improvement of policies and systems, equity carve-out will be an important way of shrinkage capital operation. So it is necessary to study performance of the company after the equity carve-out.This paper is a case study based on the equity carving-out of Conba Pharmaceutical Co.,Ltd, and make a comparative analysis investment and financial situation before and after the equity carve-out of Zhejiang Jolly Pharmaceutical Co.,Ltd. And then get the following conclusions:(1)Since the equity carve-out Jolly Pharmaceutical’s R&D expenses percentage increased,and much higher than the average level of the domestic same industry. It explanations that equity carve-out resolved Jolly Pharmaceutical investment funds (including R&D expenses) problem.(2)After equity carve-out,Jolly Pharmaceutical either short-term or long-term solvency has been greatly improved.(3) Jolly Pharmaceutical’s operating capacity has declined is due to its immaturity. During the transition period of production line updates, Jolly Pharmaceutical in order to ensure normal sales actively stocking resulting in the inventory turnover and total asset turnover decreased.(4)Jolly Pharmaceutical’s profitability is also the leader of comparable companies in the same industry, the situation is stable and one the rise.(4) Jolly Pharmaceutical is a high growth company, as a role of a leader in the emerging field segments. Its future growth capacity should not be underestimated. Therefore, the overall quality (incluing financial situation) of Jolly Pharmaceutical had an increase after equity carve-out.