The Analysis Of Motivations And Performance Of Rocodf Acquisition With Directional Convertibale Bonds

The convertible corporate bonds was born in China’s capital market as early as 1992,but neither issuers nor investors paid much attention to them.Therefore,the early development of convertible bonds was relatively slow,and the scale of convertible bonds did not exceed 100 billion before 2016.At the same time,another financial instrument that is very mature both at home and abroad,the stocks,whose development can be described as unimpeded.Major shareholders of listed companies and institutional investors are particularly interested in adopting the form of private placement.According to the Wind,its issuance scale reached the peak in 2016,reaching 1.81 trillion yuan.However,in order to build a rich,well-functioning,and fair capital market,various financial instruments need to complement each other and learn from each other’s strengths.Finally,in 2017,the CSRC intervened in the crazy growth of private placement,and its issuance scale declined for several consecutive years,providing a glimm of opportunity for the development of other financial instruments.The convertible bonds also ushered in a good development because of the cold of private placement of stocks.Since 2017,the financing scale of convertible bonds has expanded rapidly.In just five years,the balance of convertible bonds has increased from 119,818 billion yuan to 700,748 billion yuan,an increase of more than five times.The number of convertible bonds has reached 415,more than seven times that of 2017.Since the emergence of convertible bonds in China’s capital market for nearly 30 years,it finally has the opportunity to enter the horizons of issuers and investors,and finds its own place.At the same time,in order to break the deadlook which acquisition and reorganization in our country paying in cash and stock mostly,the CSRC advocated the convertible bonds can be used for the listed company M&As.Since then,listed companies such as Secote,King-strong and China Csicpower have successively tried to use directional convertible bonds in M&As.This thesis discusses the motivations and performance of directional convertible bonds in M&As.Firstly,this thesis tells the research background in the introduction and then points out the transformation of convertible corporate bonds in China’s capital market position and the significance of this background;Then it continues to sort out a great amount of domestic and foreign literatures about the motivations and performance of M&As,as well as the motivations and performance of issuing convertible bonds,and make out the directions through subsequent analysis.Then it introduces the research content,ideas and innovation points in detail.The second chapter introduces the case of Rocodf’s acquisition of Hengda Microwave,including the basic information of both parties,the industry and technical background,the motivations and the time line and the payment arrangement,paving the way for the subsequent analysis.The analytical results shows that the main reasons for Rocodf to issue directional convertible bonds to finance and purchase assets are delaying share dilution,relieving cash flow pressure and improving the company’s debt structure.In terms of financial performance,this thesis finds that the Rocodf have improved their solvency,profitability,operation and growth ability through financial ratio analysis.By calculating the economic value added,it is found that the Rocodf can improve the economic value of M&A by reducing the capital cost invested by enterprises.In terms of market performance,this thesis finds through the event study method that the excess return rate of directional convertible bonds is more stable and continuous than that without directional convertible bonds.Through the research and development intensity analysis,the innovation ability of the Rocodf has been improved.Through Tobin’s Q value,it is found that the enterprise value after M&A has been significantly improved.Combined with the above arguments,this thesis believes that the Rocodf successfully completed acquisition of Hengda Microwave with the help of directional convertible bonds and it can also help boost the performance of M&A in some aspects.Finally,this article put forward relevant counter measures and suggestions for the main body of three aspects from the case: first,the acquirer should select high-quality objects to improve the possibility of M&A success,scientifically arrange payment methods according to its own situation to relieve the pressure of M&A,and improve the conversion rate of convertible bonds as much as possible in the duration to realize the maximum effect of finding convertible bonds;second,regulators need to further improve the payment system of M&A in the future to meet the demands of all parties for M&A and to supplement more financing channels for small and medium-sized enterprises;thirdly,investors should pay attention to the in-depth study of the investment object when choosing the investment object of the convertible bond.