Function Of Private Equity Investor In Merger And Acquisition Deal

The goal of private equity investors is to realize the investment and earn the attractive return. IPO and merger and acquisition(M&A) are common channel to realize the investment. However, IPO is more easily affected by regulation and laws. Economy transformation provides great opportunities for private equity investors to realize the investment through M&A deal. The increase degree of GDP for the first half year of 2014 was the lowest one since the second quarter of 2009. The risk of economy downside is obvious, which means that China is subject to key stage of economy transformation. Normally, in order to expand, an enterprise can rely on organic growth and merger and acquisition(M&A).M&A can help acquirer obtain various resource rapidly, which leads to economic scale and cost cutting effect. In M&A, private equity investor sometimes takes negative roles, like M&A between Guomei and Yongle Electronics, conflict between Mr. Wu, CEO of NVC Lighting and Yanyan, founder of Softbank Saif Venture. There is no doubt about the positive role taken by private equity investor.In M&A between Longhua Heat Tranfer and Zhongdian Jiamei, China Venture take advantage of industry resources and perform deep synergy analysis in order to search for suitable acquirer. The key to the M&A deal is to solve the problem of information asymmetry. Compared to traditional investment banking, private equity investors are equipped with professional skills and special investment view. Shareholding in enterprise binds private equity investors in the deal. The existence of private equity investors smoothes the M&A deal and raise its efficiency. The deal is instructive for acquirers and acquires when considering initiating a M&A deal.Chapter One introduced the research background and methods, and concepts relevant to private equity investment and M&A. Chapter Two analyzed the conflicts between interested parties and affecting factors. Chapter Three described the case of M&A deal between Longhua Heat Transfer and Zhongdian Jiamei in terms of basic information, investment background and M&A background. Chapter Four analyzed the function of China Venture Capital in M&A deal and how to solve the conflicts accordingly. Chapter Five summarized the essay and made conclusion on the M&A experience.Private Equity investors solve asymmetric problem. For acquirer, it is beneficial to involve private equity investors to search for value target company depending on their professional investment skills. For acquiree, private equity investors can assist to select most suitable acquirer and protect the shareholders' interest.