Discussion On Valuation Adjustment Mechanism, Applied In Private Equity Financing Of Chinese Enterprises

With the increasing competition of market economy,enterprise can't develop without enough capital.Nowadays,financing channels changes diversified ways,but bank loan threshold is so tall that more and more enterprises prefer to choose private financing way.Due to information asymmetry between the two sides in the process of private financing,both are difficult to make a right judgment about future development.So,investors prefer require company to sign valuation adjustment mechanism.This paper combs the domestic and foreign scholars about the VAM and reviews the basis of relevant theory at first.Then demonstrates it can not only reduce investment risk but also encourage manager,so as to achieve a win-win situation.Explore what are the main risks in valuation adjustment mechanism during private equity financing and how to prevent and control possible risk.Finally,it affirms the feasibility of VAM and standing in the enterprise perspective to provide the necessary strategic support for the signing protocol process.Based on the research methods of case analysis,introduces the case of mengniu Company's successful experience.To explore its motivation to sign protocol,analysis the existing risk factors and how to control.This paper based on mengniu company discusses the VAM problems existing in the practice of private equity financing in our country,and then put forward counter measures.Mengniu company was founded in 1999,and has become the second largest turnover of the company in China's dairy until to 2005,Its successful experience in the private equity financing deserve more companies to learn from,Meanwhile it also provides motivation to write this article.Hope this article can make contribution as much as possible to the development of our country's private equity financing through.The text is divided into five parts: introduction,basic theory,basic situation of Mengniu company's VAM background and process,the application analysis of mengniu company's VAM,the basic conclusions and recommendations.The introduction part present the research background and significance,elaborate from three aspects to put forward the paper review:The market research about private equity financing,the risk from value adjustment mechanism and the operation method about VAM.In addition narrates the research ideas and methods.The second part introduces the basic theory of private equity financing and value adjustment mechanism.First bring the meaning and characteristic of private equity financing,Different periods of non-listed company's equity investments all are belong to private equity financing.Before financing,there will have a detailed investigation and strict screening program.The final purpose is not to control,but to get profits.Most of the selected objects are in the rising condition.Then from general and core factors to analysis the influence on value assessment.And then from the concept,operation mode,the terms of the classification,different forms to introduce VAM,In order to guarantee their own interest,two sides reach an agreement under information asymmetry.In terms of the mode operation about VAM,the gambling is generally performance and the chip is equity.Most of the VAM happens before listing.Next,the terms of VAM will be described In detail,including: the term of cash compensation,the term of equity adjustment provisions,the term of equity repurchase,the term of equity or cash incentives,the term of special equity,and other terms.Finally puts forward the basic theory for this paper: principal agent theory,asymmetric information theory and option theory.The third part mainly introduces the basic situation of Morgan Stanley and Mengniu company.Then elaborate the process and content of the mengniu company's VAM.The fourth part of the article point out that mengniu companies be in the rapid development stage,sign the VAM agreement not only to solve the shortage of fund With the help of investment institutions,but also to incentive management.And put forward five risks may face: the uncertain risk of future market,the valuation risk of prediction,the risk of short-sighted management,performance goal setting scientific,the risk of control right shifting.Followed by the company for the risk control,puts forward the analysis of market and industry development situation,the rational evaluation of own value,sign appropriate valuation adjustment mechanism,set proper enterprise performance goals and do equity configuration well in different finance stages,it will give us some details in the text.The fifth part put forward basic conclusions and Suggestions after mengniu company utilized VAM,including: reduce the profit misunderstanding of short-term behavior,enhance the enterprise management after the investment,selected investors carefully,prepare risk prevention measures in advance,estimate the enterprise own value objectively,strengthen the survey for financing enterprises.Every counter measures will be discussed in this paper.