Study On Financing Structure Of Leveraged Buyouts And Application Research

As one of the most influential special models at global fourth wave of mergers and acquisitions in the forth tides of 1980 s, leveraged buyouts(LBO) is the most impressive initiated revolutions in American investment banking. LBO not only solves huge financing needs from enterprise M&A, but also creates special shareholder’s value through ameliorating corporate governance structure, reducing agency cost and improving capital operation efficiency.The essence of LBO is truly a form of liability acquisition mainly using debt financing tools to increase the debt ratio of financial leverage. LBO, highly skilled capital operation mode, raise major capital with less own funds to implement the acquisition and restructuring. LBO is different from common M&A financing, which possessing multi-financing structure as inverted Pyramid structure model. This make LBO possess highly leveraged, risk, returning and technology etc features. Following factors which greatly impacts LBO financing structure, such as funds demanding, cost analysis, channel and optimal financing structure, etc. Enterprises need to seek financing portfolio equilibrium point which comprehensive financing cost and risk are both minimum, while corporate value will be maximum. This point is called corporate optimal financing structure measured by earnings per share and optimal capital structure, etc.Finally, through actual case analysis of Smith Field Shuanghui international acquisitions can help us carry financing structure theories and optimal financing structure decision model into actual transportation, meanwhile propose enterprise should highly attach attention to financing structure arrangement, financing instrument and optimal capital structure choice. From study of financial benefits and risk evaluation, also propose enterprise need to evaluate huge financial risk and heavy debt burden of LBO.Twelfth five year plan forwards to implement walk-out strategy, more and more Chinese enterprises cut a brilliant figure in world capital market. As a innovated M&A financing tool which is already testified by abroad, will attract wide attention both from the academic research and enterprises.