An Analysis On Effect Of Equity Carve-out Of Tongfang Co.,Ltd. And Technovator International Ltd.

Mergers and acquisitions brought greater benefits and lower risks to enterprises.Therefore,a large number of enterprises are keen on using mergers and acquisitions as tools to enhance their value.In 1980 s,mergers and acquisitions became popular in the United States.But when the scale of the enterprise developed to a certain extent,a series of negative effects brought by diversification appeared gradually,such as increasing pressure in financing and allocation of funds,low efficiency of management and unbalanced development of various industries.Therefore,many enterprises tried to find the rational enterprise scale,and equity carve-out gradually received the unprecedented attention.Essentially,equity carve-out is a form of contracted assets reorganization.Because after equity carve-out,the parent companies will weaken their control to subsidiary companies,and the industrial structure and ownership structure of the group will be changed also.By equity carve-out,the parent companies as well as subsidiary companies can focus resources to operate their own business.In addition,enterprises can raise funds from the capital market,encourage management and enhance enterprise value.In the last century,equity carve-out had become popular in the capital markets of the West and Hong Kong,China.In contrast,it started late and developed slowly in China.With the continuous improvement of China's capital market,equity carve-out will face more opportunities for listed companies.This paper is divided into five chapters.The first chapter elaborates the research background,research significance,research method and the basic frame of this article,and then discusses foreign and domestic researches on the motive and performance of equity carve-out.The second chapter is an overview of the theory of equity carve-out.Firstly,the paper explains concepts of equity carve-out and value effect.Secondly,on the basis of existing literatures and the combination of motive of equity carve-out,it sums up three ways by which listed companies enhance the enterprise value in equity carve-outs: broadening the financing channels,focusing resources to own business,incentivizing management to improve management efficiency.Therefore,the value effect can be further divided into financing effect,operating effect and management effect.Then the paper elaborates the main theoretical basis: information asymmetry theory,industrial life cycle theory and principal-agent theory.And then it explains the realization paths of financing effect,operating effect and management effect and evaluation methods of these effects in detail.The third chapter introduces the case of equity carve-out of Tongfang and Technovator,including company overview,industry profile as well as the motivations,processes and performances of equity carve-out in this case.The fourth chapter elaborates the realization path of the financing effect,management effect and management effect in the equity carve-out of Tongfang and Technovator.First of all,Technovator tried to realize financing effect by rights issue and stock-for-stock merger.Through the analysis of ability to raise cash,ability to pay cash and capital structure,the paper arrives at a conclusion that although equity carve-out broadens the financing channels,improve the financing structure and improve financing capacity in the short term,the long-term financing effect gradually weakened.Secondly,in the aspect of operating effect,this paper describes three paths: selling overseas resources to expand the domestic market,adjusting the industrial structure and innovating the operation mode.By analyzing the financial and non-financial indicators of the enterprise scale and profitability,the paper obtains a result that Technovator has achieved significant operating effect through expanding the market continually and improving profitability.Last but not least,in terms of management effect,the paper analyzes three paths of achieving the effect: refining the organizational structure,improving management incentive mechanism and carrying out the mutually beneficial cooperation.And then an evaluation results is obtained by analyzing the cost level and asset management level: after equity carve-out,for Technovator,management level has been improved,the cost has also been significantly reduced.However,compared with the competitors,Technovator has no obvious advantages.The fifth chapter is case revelation.On the basis of the previous analyses,the paper sums up the experiences of upgrading the enterprise value in the case of equity carve-out of Tongfang and Technovator: the rational use of the listing platform for financing is the foundation of development,the continuous reform and innovation are important ways to obtain competitive advantage,deepening cooperation is the guarantee of profit.And then the paper puts forward that,for Tongfang and Technovator,the balanced development between parent and subsidiary companies and interests of minority shareholders should be paid more attention in the future.