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Theory and Countermeasures on China's investment banks involved in mergers and acquisitions

Author: TaoZuo From: www.yourpaper.net Posted: 2010-06-03 00:11:29 Read:
Abstract: The advent of economic globalization, especially after China's accession to the WTO, accompanied by the national industry consolidation and corporate restructuring will create unprecedented business opportunities, the formation of social reallocation of resources. The strategic task of China's economic broad development space and state-owned enterprises reform and development needs of the rapid development of foreign mergers and acquisitions and investment banking, mergers and acquisitions of investment banks in China to bring the internal and external conditions. From the theoretical level, this article discusses the motives for mergers and acquisitions, focusing on the need for analysis of our investment banks involved in mergers and acquisitions, and pin the problem some suggestions. Although the development of investment banking there are constraints, but must carefully analyze and gradually solve the problems they face obstacles, seize the opportunity in order to cultivate a mature with international standards of modern investment banking.

Paper Keywords: investment banking, mergers and acquisitions theory of financial intermediation

Mergers and acquisitions motivation analysis

Efficiency motivation
Efficiency theory is that M & A activity can improve business performance, increase social welfare. There are two ways: first, economies of scale. Is generally believed that expand the operation scale can reduce the average cost to increase profits. The theory is that the main drivers of M & A activity is to seek a decline in the average cost. In addition, the merger can also bring synergies - the so-called "2 2> 4" benefit this merger enables the combined companies to increase the efficiency of more than the sum of its individual components to increase efficiency synergies from complementary joint activities in the second management and some economists believe that the level of efficiency of enterprise management become the main driving force of the M & A Company B A B merger of the two companies can improve efficiency in the management of Company A is better than B company efficiency. implicit premise of this proposition is the acquiring company can improve the efficiency of the target company's mergers and acquisitions the company has excess resources and ability to put this theory to the management of the target company has two prerequisites: (1) the acquired company remaining resources (old non-efficient management of the target company by an external manager intervention to improve

2 to diversify motivation
The theory that a business in a particular industry the longer the exposure is greater the pressure. The shortening the interbank competition heats up the life-cycle of the product more. The substitute products emerging companies must pay attention to the development of new industry or related industries the opportunity to mature. Decisive Diversification. The implementation of the diversification of operations can take the following two ways: First, by creating a new project for the diversification of operations by way of mergers and acquisitions into other industries and markets. Input-output time effects and rapid upgrading of products and services in this way tend to make costly so many enterprises through mergers and acquisitions means by creating a new project can enable enterprises to better grasp the technology products and services. reach to diversify purpose.
Agent and the management theory of motivation
The agency problems Jensen and Meckling in 1976. They believe in the proxy process due to the presence of moral hazard, adverse selection, uncertainties and other factors resulting in agency costs. These agency costs: the owner and agent contract costs qualified agents to perform the additional cost of the best or second-best decision-making agent supervision and control costs. 'Denial of the claim loss. Mergers and acquisitions in the presence of agency problems' with the following motivation: (1) M & A in order to reduce agency costs. Assessment and control of the development and implementation for decision-making in the case of corporate ownership and management separation of the terms of reference of the operator's decision-making by the owners 'management' of this mutual separation internal mechanisms designed to solve the agency problem. M & A provides an external mechanism to solve the agency problem. (2) by the theory. Moller 1969 hypothesis' that the agent's remuneration is determined by the size of the company. The agent motivation size of the company to expand 'to accept a lower profit rate of investment' by mergers and acquisitions to increase their income and improve the degree of job security. (3) free cash flow. Free cash flow refers to the company's cash amount of cash remaining after payment of all positive NPV investment plan, it helps to reduce the conflict between company owners and managers.
Second, China's investment banking sector in the need for mergers and acquisitions
China is a strategic adjustment of state-owned economic layout 'capital as the link to the implementation of the strategic reorganization of state-owned enterprises through the market to form a strong competitive cross-regional, cross-industry, cross-ownership and cross-border operations of large enterprise groups to establish a modern enterprise system . Various ways and means r only strategic reorganization of state-owned enterprises' to play the natural properties of the capital, and take full advantage of the capital appreciation through specific organization, planning and operation of capital gain in order to maximize the economic structure will be adjusted to achieve professional structure upgrade of achieving economies of scale to enhance the international competitiveness of the strategic reorganization of state-owned economy. This from a macro perspective, China's industrial structure optimization from the micro flow and restructuring of state-owned assets in stock 'and therefore face difficulties and obstacles such as enterprise system, tax system, financial system and government personnel system.
Investment banking as a modern economic knowledge, information, personnel, technology is highly intensive professional consulting industry best understanding of the law of allocation of social resources and productivity macro layout requires an understanding of successful experiences and models developed countries and the best understanding of China's macroeconomic status and problems it is the behind-the-scenes planner of the overall plan for the reorganization of assets. Corporate reorganization of assets related to specific enterprise system innovation, asset valuation, straighten out the legal relationship between the design of the mode of transfer of assets, the grafting of the organizational structure, asset stripping and disposal, debt restructuring, and even the placement of workers, social security and other aspects of these need to We carry out professional operation of the investment banking reorganization of assets and tactics experts in a significant reduction in restructuring costs, restructuring efficiency. The practice of developed countries show that there is no participation in investment banking and mergers and acquisitions is difficult to succeed or business level and difficult to improve the efficiency. The wave of mergers and acquisitions in the history of the United States, several investment banks have played an important role in promoting. From M & A overall planning, the creation of financing instruments to the implementation of the program of mergers and acquisitions reflects the crystallization of the wisdom of the investment bankers. Investment bank participation in M ??& A activity to promote the development of the U.S. economy, industrial upgrading and internal organizational restructuring. Third, the development and improvement of China's investment banks in mergers and acquisitions countermeasures
The establishment of enterprise property right system
Should further deepen the reform of property rights of state-owned enterprises to implement the government and enterprises owned by each investor ownership and corporate property rights and their corresponding responsibilities, rights and interests, the dual functions of separation of the government's social managers and owners of state-owned assets, the government no longer direct intervention in corporate mergers and acquisitions, investment agencies or departments authorized by the State on behalf of the state but by the identity of funders to participate in corporate decision-making, and enable them to become independent operators, autonomous decision-making of business entities. Batches. Phased sub-channels step by step to solve the problem of state-owned shares and legal person shares the listed.
2 achieved by the broker to the investment bank's transition
In our country, there are now many broker has some investment banking functions such as securities companies. Trust investment companies, financial companies. They are mainly engaged in the a lower securities business' Although the accumulated experience of part of the shares reorganization simply securities intermediaries engaged in the acquisition, merger, restructuring and high levels of challenging business of investment banking, there is a large gap. 'China investment banking intermediaries (securities firms) is still relatively backward' In particular, these organizations have yet to carry out mergers and acquisitions business has not established a department responsible for merger and acquisition activity. We must vigorously develop a major player in investment banking culture and training experts and gradually make the investment banking merger and acquisition activity and the prime movers' in order to make our M & A industry with international practice.
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