A Case Study On The Choice Of Financing Methods For Xiwang Foodstuffs Overseas M&A

In the 1980 s,with the continuous emergence of global mergers and acquisitions,China overseas M&A market came into being.The opening of overseas markets indicates to develop a new path for acquiring overseas high-quality resources and promoting self-developments,which attracts many domestic enterprises to have a try.Having experienced the exploration stage before 2007,the bottom-hunting stage from 2008 to 2012,the spurt growth stage from 2012 to 2016,and the rational development stage from 2017,Chinese enterprises have completed the transformation in the process of overseas mergers and acquisitions,and the M&A decision has also changed from a simple and rude means to a scientific and rigorous one,especially the decisions related to financing.Compared with domestic mergers and acquisitions,overseas M&As have the characteristics of large scale of transaction capitals.In terms of competitive bidding,enterprises with timely funding and good transaction credits are easier to stand out.It can be found that when Chinese enterprises encounter large-scale overseas mergers and acquisitions,the issue of M&A financing is particularly prominent,and private enterprises are prone to walk on the edge of M&A financing.At this stage,the relevant regulatory policies are tightening and uncertainty factors from the external environment are increasing.Therefore,how to choose appropriate M&A financing methods under the guidance of policies to seize the fleeting opportunities and promote the success of M&A activities has become a key issue that must be faced by all companies initiating overseas M&A.This paper takes Xiwang Food's M&A of Kerr,a leading Canadian nutrition product company,as the case study.The selection process of Xiwang Food's overseas M&A financing method is used as a research process to analyze the selection motivation,financing cost and financing risk of diversified M&A financing methods to evaluate the rationality of its decision-making and try to find out lessons learned from this case.This paper is divided into four parts.The first chapter introduces the research background and research significance of this paper,as well as related theories and literatures.The second part is the main body of the case,demonstrating the company profiles of the both M&A parties and the process of M&A transaction and financing.In this case,Xiwang Food adopted a step-by-step merger and acquisition method.After delivering 80% equity in advance,Xiwang Food applied the Earn-out payment which was very popular abroad.The overseas M&A financing for the completion of the 80% equity exchange can be divided into two stages.The first stage is that Xiwang Food uses its own fund financing,private equity financing,bridge loans and related party borrowing to raise funds required for the advanced acquisitions.The second stage is that Xiwang Food achieved a closed loop of debt financing after the accomplishment of the first phase of equity acquisition to repay the bridge loan and a part of the self-raised funds through the LBO financing and private placement.The third chapter is case analysis,which combines relevant theories and case practices to analyze the rationality of Xiwang Food's overseas M&A financing methods from the three dimensions including motivations,costs and risks.The following content talks about the case revelation to summarize the case experiences and forming enlightenments in the fourth chapter.