The Financing Design Of Cross-border Leveraged Buyout Of China's Private Enterprises

The 30 th anniversary of China's stock market is approaching,but more and more companies are beginning to face the difficulties of development.Mergers and acquisitions(M&A)are the way out for development.Leveraged Buyout(LBO)is used by more domestic companies because of its unique advantages.Due to the different policies and market environment between China and foreign countries,scholars keep looking for financing structures and techniques that are in line with China's conditions.Meanwhile,private enterprises are more and more important in the market,and they also face greater financing constraints than other companies.This paper aims at the design of financing model in the process of M&A,with the analysis of typical cases of LBO.The choice of the company's financing method,ultimately depends on the choice of the capital structure.Therefore,this paper basics on Static Tradeoff Theory,Pecking Order Theory and Agency Costs Theory to summarize the theory of financing in M&A,LBO and exchangeable bonds(EB).Then,in conjunction with the case of cross-border LBO by APEX,we analyze the financing structure design,follow-up techniques,and response to the dilemma,sum up experience,and provide theoretical support for other similar case.According to the result,the nature of financing instruments should be considered when designing the financing structure,and the appropriate actual debt ratio is between 50% and 70%.In detail,EB can assume similar roles as subordinated debts in the financing of mergers and acquisitions,enriching the level of leveraged financing,and it is still feasible to consider debt ratios as high as 90% under the circumstances of subordinated debt.Besides,as a mature method abroad,selling part of asset can ease the financing pressure and optimize the process of M&A integration.This paper also makes some suggestions for similar cases in the future.