The Value Creation Analysis Of “PE + Listed Company” Type Of Buyout Fund

As China’s economy has entered a new normal,the pace of mergers and reorganizations in various industries will be increasingly accelerated.In terms of policy,the government encourages mergers and reorganizations to improve the degree of industrial concentration.In view of the rapid development of the M&A market in recent years,private equity firms actively innovate the investment and financing tools and modes of mergers and acquisitions.As a result,“PE + listed company” type of Buyout Fund was born and developed rapidly.Industrial Buyout Fund can promote the effective allocation of resources and promote the adjustment and upgrading of industrial structure.And its establishment accords with the combination of financial capital and industrial capital under the current economic environment of our country.But many problems are emerging due to the limited development time.Many Buyout Funds have no further operation and management after being set up and make them into zombie funds.Compared with direct mergers and acquisitions,under what circumstances will “PE + listed company” type of Buyout Fund be more advantageous? How does “PE + listed company” type of Buyout Fund create value?This paper takes Jinsheng Fund as a case study,analyze the research question according to the logic of “motive-effect-path”.Firstly,this paper introduced the whole process from the establishment to the exit of this fund.Secondly,analyze the reasons that it was set up and the effect of value creation by Event Study,Economic Value Added and Cost Benefit Analysis.Then,analyze how it created value from five aspects--establishment,fundraising,investment,management and exit.Finally,extract the universal conclusion according to the case.It is found that “PE + listed company” type of Buyout Fund can create value.In order to promote the successful experiences of this case,summarize the application situation of “PE + listed company” type of Buyout Fund according to its advantages.It is suitable for the establishment of Buyout Fund when listed companies exist in the following circumstances: insufficient funds and limited financing;existing a merger intention but no merger targets;insufficient ability of management integration.Through the analysis of the measures of producing positive effects in the case,I made recommendations that apply to most businesses——Firstly,motivation is the determining factor.M&A activities of listed companies should be based on the consideration of the company’s development strategy,rather than market value management.Secondly,listed companies should choose a high reputable private equity firm which can reduce the agency cost and improve efficiency of M&A.Thirdly,the benefit distribution clause should be designed reasonably.In addition,in view of the deficiencies in the case,the following supplementary suggestions are put forward: listed company should perfect the incentive system,treat the performance commitment cautiously,strictly implement the information disclosure system,and handle the relationship with investors.“PE + listed company” type of Buyout Fund has the advantages that direct M&A does not.Although there are many problems in “PE + listed company” type of Buyout Fund,with the gradual improvement of China’s market mechanism and the continuous improvement of the professionalism of private equity firms,“PE + listed company” type of Buyout Fund will become an important part of the M&A activities in the future.Therefore,the study is of great significance.