Research On M&A Payment Methods Based On Directed Convertible Bonds

The choice of payment method is an important decision in M&A transactions,which affects the conduct of the transaction and the finances of both parties.In November 2018,the China Securities Regulatory Commission issued an announcement "The China Securities Regulatory Commission Pilots Targeted Convertible Bond Mergers and Acquisitions to Support the Development of Listed Companies",introducing targeted convertible bonds into M&A payment tools.There are three important payment instruments in China’s M&A market: cash,stock and directional convertible bonds.At present,the theoretical research and practical application of cash payment and stock payment are more abundant,while the research and application of directional convertible bonds are less.A case study of directional convertible bond payment will help to support the theory and provide reference for practice.Based on the existing literature and theories,this paper summarizes the selection ideas and influencing factors of payment methods,and analyzes the influence of various factors on M&A payment methods in detail through the study of Rong Da Photosensitive Science &Technology Co.’s mergers and acquisitions,and analyzes the causes and effects of directional convertible bonds.Through the case study,this paper draws the following conclusions:(1)The directional convertible bond payment can alleviate the problem of bilateral information asymmetry.When both parties of the merger and acquisition have a large degree of information asymmetry,the directional convertible bond payment is beneficial to the interests of both parties.Improve the probability of successful mergers and acquisitions.(2)The setting of terms is an important part of directional convertible bonds,and only appropriate terms can make directional convertible bonds play a role in bilateral asymmetry.(3)When using directional convertible bonds to pay attention to the impact on financial leverage.Excessive financial leverage after the issuance will make the company face higher financial risks.In view of the advantages of directional convertible bonds in the M&A market and the fact that they are not suitable for non-listed companies,this paper puts forward the following suggestions:(1)Improve the relevant laws on the payment of directional convertible bonds.(2)Improve the quality of information disclosure of listed companies,Strengthen the construction of due diligence talent team to alleviate the problem of bilateral information asymmetry in mergers and acquisitions transactions of non-listed companies.