The Model Research Of Domestic And Foreign Buyout Fund And The Case Analysis

With the rapid growth of merger and acquisition market, buyout funds originated from America have experienced a vigorous development in China, and sparked intense discussion. When compared with other merger and acquisition methods, buyout funds have a significant role in promoting the economic restructuring, enhancing capital market efficiency, increasing firms’ funding channels, improving firms’ management structure and competitiveness. Hence, the healthy development of buyout funds is critical to our economic and financial markets. However, because the underdevelopment of our financial market, insufficient legal conditions, immature business environment and weak integrating capability of funds, the buyout funds in China cannot copy the development patterns of those funds overseas. Moreover, starting with the establishment of Hony Capital in 2003, buyout funds in China just have a history of ten years around, and a suitable way for them to develop is still under exploration. So, the target of our buyout funds is still unclear. Given this background, studying the development of buyouts in China has great practical significance.Using comparative method and event study, this article studies the buyout funds based on their organizational forms, financing methods, operating patterns and exit mechanisms. Firstly, the author introduces the findings of other scholars and explains the basic definitions and development methods of buyout funds. Secondly, this essay analyses the current situation of buyout funds and the factors that limits their development. In the following part, this article analyses two specific buyout funds, one is the KKR fund from the USA, the other is the Zhejiang Silicon Paradise Asset Management Group from China, then gives some advice which could be used by other buyout funds in China. Finally, the author summarizes the whole paper and presents some recommendations on how to provide a favourable environment for the development of buyout funds in China.The author thinks that there are several problems constraining the development of buyout funds in China, for instance, limited financing channels, difficult to control the company, under-developed exit mechanism, insufficient regulation and questions about fund managers’ skill. These problems restrict the scale of buyout funds and their function in capital markets, weakening their competitive. So the government should provide proper policies to help and guide the development of buyout funds and the fund themselves also need to improve their management to find a development method that suit China.