Case Study Of Sichuan Quanxing Management Buyout

Management buyout is a kind of acquisition deal which changes the ownership structure, controlling structure, and capital structure. In western countries, such as the U.S. and the U.K., management buyout has a history of nearly 40 years. In general, management buyout has been recognized as a positive activity by both the academy circle and the industry. In China, management buyout started later than in the western and is during its early stage of development. However, China management buyout was somehow required to take more responsibilities, e.g. SOE reform, solution of SOE low efficiency, clear-cut ownership, and motivation philosophy. However, some key issues often occurring in the management buyout activities have not been fully placed on the table.This paper puts effort on one of the typical management buyout activities during the Chinese SOE reform progress – Sichuan Quanxing Management buyout case. Both normative research and empirical research are deployed to deeply excavate the issues behind this buyout case. The author takes advantage of several research methods such as investigation, quantitative study, qualitative study, simulation analysis, and comparable analysis.To begin, this paper reviews the main management buyout literatures. The focus is particularly place on the management buyout conditions, motivations, and impacts. Some main theories are studied so as to demonstrate the influence of management buyouts upon enterprise value improvement and operating efficiency. After that, this paper spreads the study to the whole Sichuan Quanxing case. The author puts effort on the background of China modern enterprise system reform, characteristics of China management buyouts, the features of the white spirits industry, capital structure, background of Sichuan Quanxing management team, the whole process of the buyout activity, and the role of the government. The author is trying to find out the universality of China's management buyouts through this case. In the end, this paper uses several methods to analyze and measure the true value of the company and compare the differences between the results of different methods and the price paid by the management team.The author is trying to conclude, through this paper, some find-outs about the loss of value of the companies which encountered management buyouts in China. Management buyouts would be difficult to be functioning if the management buyout activity were not given a healthy system and open market. It also cannot make China enterprises to quickly develop if we don't simplified approval system and competitive environment.