Research On Financing Problems Of Enterprise Leveraged Buyout

In recent years,with the gradual development and improvement of China’s capital market,the desire of enterprises to grow and develop is becoming more and more intense,and mergers and acquisitions among enterprises are also commonplace.As a special way of mergers and acquisitions,leveraged buyouts are more and more valued by enterprises.The characteristics of “small and large” make this merger and acquisition method bring hope to enterprises that have insufficient funds and want to expand their business scale.Although leveraged buyouts are very popular,this paper argues that LBOs may not be able to achieve the desired results smoothly.The various problems faced by enterprises in the financing process cannot be ignored,mainly reflected in the selection of financing channels by M&A companies.In terms of the control of financing costs and the response to financing risks,whether these three aspects are handled properly is directly related to the success or failure of leveraged buyouts.This paper selects LW Media’s leveraged acquisition of WJ Culture and JL Group’s leveraged acquisition of Volvo Cars as a comparative analysis of the financing problems of classic positive and negative cases,finds out the reasons for its failure and successful experience,and proposes feasible financing advice of leveraged purchases for Chinese companies.This paper first introduces the acquisition motivation,process and results of the acquirer;then analyzes their financing problems from the perspectives of financing channels,financing costs and financing risks,and finds the monotony of financing channels and financing costs of LW Media.Unreasonable and inadequate response to financing risks made it unable to successfully leverage the acquisition of WJ Culture.Its various problems in the financing process,coupled with the nature of its hostile takeovers,were punished by the China Securities Regulatory Commission,while the JL Group’s financing channels Diversity,compliance with actual financing costs,and effective response to financing risks have made Volvo Cars a significant success.Finally,based on summarizing the respective financing practices in the two LBO cases,three rationalizations have been proposed for leveraged acquisitions of Chinese companies.The proposal to follow-up companies can increase the success rate of leveraged buyouts.