Research On The Application Of Buyout Fund In The Process Of Mergers And Acquisitions

In recent years,mergers and acquisitions have gradually become the main means for companies to open up markets and improve profitability.The main condition for companies to complete M&A is to find suitable financing channels.With the country's emphasis on continuously innovating financial products and improving financial and taxation policies,Buyout Fund are widely used by listed companies as an innovative financing method compared with previous methods of Internal financing,equity financing and bond financing.According to statistics published by the Zero2 IPO Research Center,the statistics of Chinese private equity investment market in 2017 showed that there were 2533 private equity investment funds raised in 2017.The number of raised funds increased compared to 2016,and the amount of raised funds increased by as much as 43%.In addition,the number of PE/VC-infiltrated M&A transactions has also been on an upward trend,and the participation of buyout fund in the M&A process is becoming more and more common.This article selects the first case of a publicly disclosed deal to successfully complete the structured arrangement of the buyout fund—the acquisition of Watertek Information purchase Tellhow Intelligence.Combining the relevant theories of buyout fund,some suggestions for the use of buyout fund by listed companies are provided for reference by other companies.This article mainly uses the methods of literature research and case analysis.Based on the principles of principal-agent theory,information asymmetry theory and synergy effects theory,A detailed analysis of this trading mechanism,which is the acquisition of Watertek Information purchase Tellhow Intelligence using Buyout Fund Huida Fund and Xinyu Jingda.Before the M&A transaction,the actual controller of the listed company participated in the buyout fund.The buyout fund acquired 50% of the shares of the target company and became the shareholders of the target company.The listed company purchased the target company through the share exchange transaction,and the original company's shareholders became shareholders of the listed company.The participation of buyout funds in this transaction not only reduces the financing pressure for listed companies,but also introduces strategic partners for listed companies,while protecting the stability of the control of listed companies.However,the participation of buyout funds still brings some problems to the listed companies.The actual controller andthe buyout fund may form an associated relationship,which may damage the interests of the small and medium shareholders.The impact of current financial policies on buyout funds requires the design of more reasonable fund arrangements by listed companies when they are used.Through the study of theories and cases,it is found that in the three organizational forms of buyout funds,limited partnership buyout fund are the most widely used in enterprises.Their structured arrangements attract investors,but there are also some problems.The participation of buyout fund in the M&A process provides both financial support for the company and certain risks for the company.The controlling shareholders of listed companies participate in the buyout fund to maintain their control rights and help the company to complete the acquisition smoothly.However,the guaranteed principal income provided by the controlling shareholder for the priority partner of the merger and acquisition fund will affect the listed company and the small and medium shareholders.For listed companies,under the constraints of relevant policies,if the listed company wants to complete the transaction smoothly,it should compress the size of the exchange transaction.In addition,the acquirer can combine the buyout fund with other financing methods,stratify investors according to risk preferences,and design more flexible investment plans.On the other hand,fund managers and listed companies also need to reduce their leverage when designing buyout funds.Appropriate demolition of structured arrangements will not only attract more investors,but also be more in line with the current economic situation of deleveraging.