Study On The Application Of Private Placement Convertible Bonds In The Payment Methods Of M&A

As China's economy gradually shifts from high-speed development to high-quality development,the future development direction of domestic enterprises is bound to be industry integration and industrial upgrading.A huge wave of M&A may be waiting for us.However,domestic enterprises face the problem of lack of means of payment for mergers and acquisitions,and can only make choices in cash payment and share payment,which seriously hinders the process of M&A.In November 2018,the CSRC proposed a pilot to promote private placement convertible bonds as a means of payment for M&A.The tool does not need to pay a lot of cash in the current period,while delaying the effect of equity dilution,is an excellent way to pay for M&A.This paper analyzes the advantages and disadvantages of this new payment method by analyzing the case of the first A-share convertible bond.At the same time,the article has made in-depth research on the issue conditions,clause design and regulatory regulations when it is used as a means of payment for M&A,which has very important theoretical and practical significance.Based on the literature review of the relevant theories of M&A payment methods,this paper summarizes the current situation of M&A payment in China,compares the advantages and disadvantages of various payment methods,and summarizes the main influencing factors affecting M&A payment decisions.At the same time,the article introduces the concept and status quo of private placement convertible bonds,and its flexibility in terms of design is the biggest advantage of new M&A payment methods.Then,by introducing the case of the acquisition of Lingou Co.by Secote Co.,this paper finds that due to the high debt ratio and the sluggish stock price of Secote Co.,the traditional M&A payment method cannot meet the needs of the acquirer.Targeted convertible bonds have many advantages such as cost reduction and capital structure improvement.Therefore,the acquirer chooses the target convertible bonds as the main means of payment for the acquisition.On this basis,the article further analyzes the terms of the convertible bonds and regulatory opinions,and draws the following conclusions.Private placement convertible bonds can significantly reduce the cost of payment through clause design,and resolve the contradiction between the two parties.The tacit approval of the regulatory layer means that it is reproducible,and the significant reduction of the issuance conditions also means that it can be promoted on a large scale.This is destined to be an excellent M&A payment mean.This article takes the first case of private placement convertible bonds as an example to further explore its advantages and promotion as a means of payment for M&A.We believe this is a financial instrument that may exceed the trillion size in the future.Therefore,the article suggests that the government should vigorously promote the depth and breadth of the application of private placement convertible bonds.The government should also set up special regulations and monitoring platforms for such special financial instruments to ensure that the private placement convertible bonds better serve our economy and avoid being abused by lawbreakers.