Application Of Valuation Adjustment Mechanism In Private Equity Financing Of Evergrande Real Estate Group

With the continuous development of our China's economy,the financing channels of enterprises have also been broadened.For many minor and medium-sized enterprises that are in a period of rapid growth,traditional financing methods such as bank loans are not applicable.These enterprises often take shape,their credit ratings are relatively low,but their funding needs are huge,so many companies choose private equity financing.Since 1984,the venture capital concept has entered China.After more than 30 years of development,private equity financing has become an indispensable important role in China's financial market.However,in the private equity financing,due to the different interests and differential information,there are many problems such as Asymmetric Information Problems or Principal-Agent Problem.In order to resolve the contradictions and disputes between the two parties,and in order to reduce investment risks and achieve a win-win situation for investment and financing parties,both parties often sign the Valuation Adjustment Mechanism in investment agreements.This article is based on the Valuation Adjustment Mechanism as a risk control method,using case analysis plus empirical analysis methods.The article first describes the practice of the use of Valuation Adjustment Mechanism in the private equity financing of Chinese enterprises.It elaborates on the status and characteristics of the Valuation Adjustment Mechanism,and then finds that the Valuation Adjustment Mechanism has a high failure rate in the practice of our country.Related data Lack of data,there are few examples that companies can refer to,and most practice cases choose financial performance as the standard for Valuation Adjustment Mechanism,and there are fewer cases choose time of IPO of market as a standard.In response to these problems,this article selected a representative case that Evergrande Real Estate Group conducted a specific analysis of gambling cases.The reason why this case is,first of all,is that the selection criteria of Evergrande Real Estate Group choose the time of IPO as a standard in the Valuation Adjustment Mechanism,and the proportion of such indicators is not high in the entire practice.In terms of open cases,most of the companies that selected such indicators ended in failure.Evergrande Real Estate Group counts one of the few successful ones and has a good demonstration role.Secondly,because the case process in this article also involves the listing process,the situation is more complex than other gambling cases.This example can be used as a reference for other companies wishing to use the Valuation Adjustment Mechanism in IPO financing.Finally,because the real estate industry of Evergrande Real Estate Group is vulnerable to the macro-environmental impact and risks of Valuation Adjustment Mechanism are even greater,Evergrande Real Estate has developed rapidly after completing the Valuation Adjustment Mechanism and listing process.It not only ranks among domestic first-line real estate developers,but also In tourism,food,sports culture and other industries to carry out all-round development,is an excellent example of the successful development and growth of an enterprise.The innovation of this paper is the case analysis plus the empirical analysis method from the case.It not only demonstrates the case operation process of Evergrande Real Estate Group in detail through the case analysis,but also completes the Valuation Adjustment Mechanism of Evergrande Real Estate Group by calculating the EVA value.Performance evaluation was conducted after the IPO and the results of the case can be better judged through double analysis.After detailing the operation of the case,the article then performed a performance analysis and risk analysis of the case.The performance analysis method adopted in this paper is to calculate the EVA value.Through calculating the EVA value of Evergrande from 2009 to 2016,it can be found that since the completion of betting on 2009,the EVA value of Evergrande has always been positive.It shows that companies are making profits and continue to create value for shareholders.Although in 2012 and 2013,due to the national macro-control policies,the value creation capacity has decreased,but the overall trend of its EVA value has been showing a state of growth,indicating its value creation.The ability to keep increasing.The risk of this case is mainly reflected in the risks of the investor and the risk of Evergrande.From the investor's point of view,Evergrande's profitability has not been truly improved in the entire process of impact on the listing.The main source of income increase comes from the investor's purchase of its project development rights,and the investor has virtually increased cash input.Second,Evergrande Property was unable to repay huge debts after the first listing failed,and the investor's initiative extended The helper injected capital again and gave some concessions in terms.In Evergrande Real Estate Group,the risk is mainly reflected in the macro environment it faces,the choice of gambling standards and the content of its agreement.To address these risks and how to effectively use the Valuation Adjustment Mechanism,this article has the following implications: First,companies need to evaluate whether the Valuation Adjustment Mechanism is applicable to the enterprise before using the it.Whether the company needs to use private equity from the life cycle of the enterprise Listed companies and capital development strengths and industry conditions are measured in three respects.Secondly,companies should carefully choose the type of gambling agreement,select appropriate gambling standards,and recommend adopting a repeat game to gambling;again,enterprises should pay attention to macro environmental risks.Finally,companies should improve their core competitiveness.The innovation of this paper is to adopt the case analysis plus empirical analysis method.Through the case analysis,the case process of Evergrande Real Estate is shown in detail.After calculating the value of EVA,Evergrande Real Estate completed the bet and listed it.Performance evaluation can better evaluate the results of the case through double analysis.The main inadequacy of this paper lies in the fact that this paper only selected one case of Evergrande Real Estate Group for analysis,lacking comparative analysis,and has certain limitations.In addition,the case study is mainly used in this paper and the risk of the Valuation Adjustment Mechanism is not summarized completely,and due to lack of more in-depth empirical research,the lack of substantive measures of risk control measures,and hopes to expand research examples and sample data will be studied in depth.