Research On Payment Scheme Design And Cross-border M&A Risk Prevention In The Context Of M&A Fund Participation

In recent years,with the transformation and upgrading of the Chinese economy,Chinese companies have increasingly searched their M&A targets overseas for seeking technological and industrial upgrading and market expansion.Many Chinese enterprises set up industrial mergers and acquisitions funds in the process of mergers and acquisitions.The merger and acquisition funds that joined the merger and acquisition activities as intermediaries have changed the characteristics of those previous one-time M&A transactions usually composed of two successive mergers and acquisitions.The existence of M&A funds has changed the stage division and risk generation mechanism of M&A activities and also made the design of payment schemes of M&A parties more complicated.showing diversified and innovative features.The risk prevention and control role of payment schemes in cross-border M&A received attentions of Chinese enterprises.Firstly,based on the theoretical analysis,this paper analyzed the risk generation path and mechanism of cross-border M&A transactions with M&A funds participating in it.It is believed that due to the information asymmetry and the principal-agent relationship,the main M&A risk was transferred to the subsequent transaction between the M&A fund and the listed company.Then the paper determined the direction of thinking for the next analysis.Secondly,this study introduced the case of Jifeng’s merger and acquisition of GRAMMER,summarized the payment scheme design of two transactions in the process of Jifeng’s case,and sort out risks faced through preparation activities,two transactions process and the integration process.Then the paper analyzed the prevention and control effects of step-by-step payment on the target selection risk of the M&A in preparation stage,the strategic risk and legal investigation risk.It found that the mixed payment of cash,shares and convertible bonds can prevent financial risk and equity dilution risks.The earn-outs payment and asset impairment compensation agreements can control valuation risks.Thirdly,through analysis,this paper believed that the M&A transaction situation and the characteristics of both parties will affect the design of the payment scheme.Dividing the M&A transaction into multi-step can effectively filter risks.Companies can make full use of new mechanisms such as directed convertible bonds and earn-outs payment to prevent and control M&A risks.Enterprises should carefully consider the use of share-based payment in cross-border M&A activities to avoid the risk of equity dilution.At the same time,M&A funds should pay more attention to the prevent and control of financial and integration risks in the context of cross-border M&A activities.Finally,the innovation of this research lies in the focus of the research on cross-border merger and acquisition transactions in the context of the participation of M&A funds.The payment schemes are carefully divided and the various risks in stages of merger and acquisition are identified.At the same time,this study also discussed the risk prevention and control of directional convertible bonds and contingent earn-outs payment.