Application Of Trust In Mergers And Acquisitions Financing

Mergers and acquisitions(M&A)are transactions in which the ownership of companies,other business organizations or their operating units are transferred or combined.As an important strategic choice,M&A allows enterprises to grow,shrink,change the nature of their business.M&A is also an important way to reallocate social resources,improve the industrial concentration ratio,and boost market economy.China is now in the transition period from Planned Economy to Market Economy,therefore,it is an effective way to improve the competitiveness of the enterprises through M&A.M&A is a very complicated process,and enterprises will met with many problems in the process,among which merger financing is one important problem in the process of M&A strategy,and it has a decisive influence on the successful of the M&A.China's mergers and acquisitions began with the reform and opening up,however,the real M&A has a history no more than ten years.What's more,with it's capital market underdeveloped,and rare financing sources,financing problem has been a decisive factor in enterprise M&A in China.The development of Chinese economy will usher in a new wave of mergers and acquisitions,and the need for financial support will increase tremendously;many enterprises in China eventually abandon the acquisition due to the inability to raise enough money.Despite of this inability,the insufficiency and obstructed access have also contribute to the problem.Under China's current monetary policy environment,most of enterprises has experienced the financing problem,and M&A financing is even more difficult because M&A financing needs to not only take the size of the financing in to consideration,but also the financing rate and the cost of financing.Trough six industry consolidation,China's Trust industry had made rapid development,and gradually embarked on the stage of mergers and acquisitions.With the institutional advantages of “Mixed Operation” and a strong capital base,Trust industry began to play an important role in financing.This paper concentrates it's study on the application of Trust in merger financing.By carrying a thorough research on the present situation of merger financing and the development of the Trust industry,it has been found that Trust with it's institutional advantages can provide financing support for M&A enterprises.It can not only expand its new business model,also can realize its own transformation and development.Then according to the Trust system and the relative financial theories,this paper expounds the modes of four kinds of enterprises who completed the M&A through Trust financing,and carried out a detailed analysis of each mode.Finally,by using the case-analysis methodology,the paper discussed and analyze the cause and effect about trust used in enterprise Merger & Acquisition.In this paper,theoretical knowledge and practical case combined analysis results: Trust can play an important role in the financing of mergers and acquisitions.The Trust has certain advantages in financing mergers and acquisitions,especially in the hypothecation flexible,fast financing,financing costs relatively little and transparent,to improve the acquisition of concealment,etc.,with a strong practical application value.In recent years,mergers and acquisitions as the Trust innovative financing instruments has been recognized,but less on research,I hope that through the analysis of this article,on the one hand,to help analyze Dongxu Group Trust in the acquisition financing in the role,summarize trust financing experience;on the other hand,with Dongxu Group for the same or similar financing needs of corporate mergers and acquisitions,this article will provide a useful reference to help them choose a more efficient means of financing,the successful completion of acquisitions.