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On National SME financing issues related to mergers and acquisitions analysis

Author: QinZhiMin From: www.yourpaper.net Posted: 2010-06-03 04:33:28 Read:
As China's capital markets are underdeveloped majority of small and medium enterprises face difficulties in financing, mergers and acquisitions as a way of integration of resources can play a role of the corporate finance M & A is a valid path for the rapid development of SMEs is to make the upgrading of industrial structure in China. Out of the same competition. Achieve economies of scale the only way to achieve excellent economic sector in the inferior elimination
SMEs in China M & A financing methods design
1. The composition of the financing channels
(1) equity capital financing. The main source of equity financing is the advantage of the company's internal capital or shareholders' investment, the number of basic requirements is to achieve absolute control of the target companies or relative holding, which is the fundamental requirement of competitive enterprises M & A activity. Other sources of equity capital financing also includes an option certificate, venture capital, the target company's management and internal or external investors.
The share warrants financing is a new financing tool, the finance object can be dominant enterprises and the management or employees of the target company, it can be external investors. The share warrants financing of small and medium enterprises, especially small and medium-sized high-tech enterprises has been applied. Which is characterized by a long-term option. Given an option certificate holders the right to buy a given number of shares at a particular price during certain periods, it can be said that a stock options, profit in business in the future. The investor's power comes from the companies listed on the expectations and profit expectations. Share warrants are exercised, the original issued by corporate debt have not been recovered, the issue of new shares means that the new financing, the company's capital increase. Source of risk capital is more extensive, such as various domestic and international venture capital firms, venture capital funds, venture investment funds. Venture capital to get to the target company's assets and future income as collateral.
(2) debt capital financing. Debt capital mainly refers to bank loans, as mergers and acquisitions for both, looking for some guarantee pledge means as much as possible, access to bank loans. Difficult to obtain bank loans, part of the funds in the debt capital in a subordinate position.
These are the basic considerations about SMEs in China M & A financing channels. On this basis, or may have other financing channels, but the premise of the holding position of the target company must be of an appropriate scale to the amount of financing and competitive enterprises.
2. Finance design
(1) buyout fund financing for SMEs. From the narrow reality of China's M & A financing channels for SMEs, should be government sector funded or lead to the establishment of small and medium enterprises buyout fund. The fund property rights trading market as the main area of ??investment, financing and related services designed specifically for enterprise capital expansion or restructuring adjustment. Relationship of the fund is invested enterprises M & A funds can be divided into participatory M & A funds and non-participatory M & A funds. The promising SMEs deserves the support of the Government in the implementation of mergers and acquisitions, because small and medium enterprises mergers and acquisitions is conducive to local businesses structure and industrial structure adjustment, is conducive to regional economic development.
(2) the use of an unsecured loan facility. Unsecured small loans are a form of a loan specifically for small and medium enterprises, financial institutions to provide credit for the average small business loan products. Financial institutions to provide loans to support the capital demand side, does not require fixed assets, bills of lading and other normal commercial loan collateral or security. Unsecured loans have a high degree of risk, so the loan companies require a higher threshold, unsecured loans in the country less, carried out mainly in Shanghai and other capital markets in more developed areas.
Domestic SMEs unsecured loan demand is quite strong. Large and medium-sized enterprises can use mortgage credit "access to bank loans, large enterprises financing through the capital market. However, for small businesses, often neither collateral could not find guarantees make it difficult to obtain financing from the bank. Because of concerns about the risk, domestic banks have been prohibitive for unsecured loans. In the international arena, "credit" is a rather popular. Recently, Standard Chartered Bank launched in China, the unsecured loan business. The unsecured loan business to be successful in many emerging markets, such non-performing loan rate is higher than the general corporate loans, but lower than consumer loans. Features without collateral, pay attention to the prospects of loans to businesses to enable them to a higher degree to meet the financing needs of SMEs. SMEs should regulate corporate governance, financial system and the Articles of Association of the company's operation to meet the conditions of unsecured loans, the successful financing when necessary.
(3) seller financing. The seller's credit in the United States called "seller financing" (SellerFinancing), is the commitment of the seller fixed the acquisition of future payment obligations. In the United States, often in the company or business unit profit poorly seller anxious to get rid of the case, to produce this is conducive to the acquisition of Payment. For company M & A fixed price in case of seller's credit, the operation of the process is relatively simple. Mergers and acquisitions both sides there is a clear credit and debt in accordance with the terms of the transaction and payment provisions, the operation of the target company after the merger, M & A success or failure of the M & A business should bear the responsibility, not without reason remove or change such claims and liabilities. Acquisition price is not fixed, the acquisition price depends on the results of operations after the merger, the change of the presence of credit and debt problems, the basic approach is the beginning of the merger, the buyer paid in cash portion of the acquisition price, the rest of the price adjustment to post-merger performance The amount of debt paid in installments. In general, paid in installments when asked l to 3 years is more common, and no more than five years, or changes in market conditions affecting the performance of the company, is extremely detrimental to the shareholders of the target company.
(4) the management financing. Competitive enterprises in the target company M & A financing structure, capital from the target company's management is the important part. To finance the management of the target company is diversified, debt capital financing can give the management of stable interest income from debt and equity capital financing can give management more substantial distribution of profits. , With options for the management of the target company has the right to vote and the right to the distribution of profits, this is a great incentive for them. Given to the management of certain options, will give the company some control over and profit distribution rights. Once the management of the equity interests of enterprises is the interests of management. Be seen, the importance of the management of the financing is not the financing itself, but rather to establish an equity-based incentive mechanism.
In addition, due to the management of the target company in the business has accumulated a lot of experience through the equity allocation can attract the best management and technical personnel to maintain the continuity and stability of the management and operation of the target company, and, also enhances the sense of belonging of the management personnel of the enterprise, thus creating a loyal corporate management.
3. Financing strategies
The choice of strategy is also very important in the process of acquisition finance for SMEs, specific strategies are as follows:
(1) internal potential, make full use of the tangible assets of non-financial enterprises do not need. The acquirer owned machinery and equipment, plant, land, production lines, departments and other non-financial assets to achieve the target company's mergers and acquisitions as a means of payment.
(2) consecutive successful mortgage strategy. Assets of SMEs in China, generally loans in the financing process first advantage company's assets as collateral, to fight for the appropriate number of loans to banks, after the success of mergers and acquisitions, and are secured by assets of the target company to the bank apply for a new loan.
(3) a combination of the venture capital strategy. This combination strategies include a combination of a combination of sources of risk capital and debt capital and equity capital. Mix of sources is obtained from multiple venture capital firms, this combination can not only reduce the amount of financing of a single venture capital firm, to reduce the difficulty of financing a wide range of help and support, but may be due to the different focus of the venture capital firm advantage to the enterprise . The combination of debt capital and equity capital is not only the debt capital from venture capital and equity capital from venture capital, so you can take advantage of the different level of participation of venture capital in the debt capital and equity capital, get a lot of risk capital and venture capital business management, business, marketing and technical guidance to improve management, M & A value.
(4) installments strategy. The general practice is competitive enterprises in the target company holding position, in installments within a certain time the payment, which can to some extent reduce the size and difficulty of financing, mergers and acquisitions as soon as possible.
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