A Study Of Leveraged Buyout In China's M&A Illustrated By The Case Of Qihoo 360 Privatization Deal

Leveraged Buyouts(LBO)is featured with unique transaction pattern and high-leveraged financing structure.The special kind of M&A method enables acquirers to complete the M&A deal with little amount of equity capital.In addition to that,the financial leverage imposed on the target company helps to increase both the target company' s value and investment return to acquirers.Under the background of industry transformation and upgrading,M&A activities are developing rapidly in China.LBO offers new option for Chinese acquirers and help them to finance for the M&A and create value.Thus the study of LBO's development and application in China is of great significance.This paper starts with the case study of the U.S.A.LBO history,analyzing the drivers of LBO development from the standpoints of economic development,innovation of financing instruments and regulation change,and summarizes the features of deal structure and financing means with the case of KKR's acquisition of RJR Nabisco,and furthermore analyzes the value creation function and risk management of LBO.Then it summarizes the development of LBO in China and comparatively analyzes the current situation of LBO financing,targets and acquires based on the case study of the U.S.A.LBO history.Furthermore,it analyzed the importance of LBO to China from both a realistic perspective.Then with the case study of Qihoo 360 privatization deal,it points out the features and problems of China's LBO deal.Finally,based on the previous analysis,it comes out with proposal of LBO development in China concerning innovative financing instruments,private equity and investment bank.