Application And Risk Of Private Equity EB In M&A Financing

In recent years,exchangeable bonds have developed rapidly in Chinese bond market,and have been actively used in different areas,like low-cost financing,reduction of holdings,and market value management of enterprises.This is inseparable from the SFC's restrictions on the reduction of holdings,the limited market conditions for corporate financing,and the growing maturity of the bond market.Among them,private exchangeable bonds can be used in the market more widely because of its advantages of high approval efficiency,limited financial indicators,and relatively relaxed supervision.In the case of Apex's cross-border acquisition of Lexmark,the major shareholder,Saina Technology,issued a private equity bond with 16 Saina 02 to finance,and then borrowed funds from the fund to Apex to help it successfully complete the merger.Through detailed analysis of the choice of financing methods in this case,the design of financing transactions structure and the possible derivative risks,it has certain reference value for other companies to apply private exchangeable bonds in M&A financing.This article uses a combination of qualitative analysis and quantitative analysis to conduct research.First of all,it sorts out the theoretical overview of exchangeable bonds,and provide statistics and explanations on the background and status of exchangeable bonds in China.Secondly,it focuses on the comparative analysis of exchangeable bonds and other financing methods,as well as theoretical explanations of the risks that may arise from them,laying a realistic foundation for subsequent research.Finally,in the case section,it first analyzes and contrasts the financing needs and options of Apex's overseas mergers and acquisitions from the three aspects of financing effectiveness,financing cost,policy requirements and supervision.And then,it analyzes decision-making process and the application of the 16 Saina 02 in the acquisition of Apex through Lexmark.Next,this articlel study at the risk that 16 Saina 02 may use in the M&A transaction,and use the implied capital cost rate as an indicator to measure debt repayment risk and share exchange risk,and renew the coupon rate and exchange price of 16 Saina 02 for designing a better balance the two types of risks.The final part of the case analyses and summarizes the financial impact on companies and the short-term market response after adopting 16 Saina 02 financing,and studies the overall impact of private exchangeable bonds in the application of M&A financing.The main research conclusions of this paper are as follows: First,the current issuance of exchangeable bonds by China's issuers mainly includes financing,reduction,arbitrage,and equity incentives,among which the use in merger and acquisition transactions is mainly for low-cost financing.The way in which major shareholders issue private exchangeable bonds and issue loans to listed companies has certain applicability and particularity.It is mainly applicable to major shareholders who have absolute control over listed companies and it is not a listed company itself.Second,compared to other Financing methods,private exchangeable bonds have the characteristics of low issuance costs,large amount of funds raised,and rapid approval process.Third,the derivative risks arising from the combination of private exchangeable bonds and M&A financing are mainly at two points: debt repayment risk and exchange risk.The issuer can use the implicit capital cost rate as a standard to measure the impact of the two risks,and determine the appropriate coupon interest and exchange price according to the different issuance purposes.