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Analysis of mergers and acquisitions in the bank loan financing risk and Its Countermeasures

Author: ChengZhiQiang From: www.yourpaper.net Posted: 2010-06-05 19:08:16 Read:
Keywords:   the merger and acquisition of enterprises; financing risk
Abstract: enterprise M & A has been a constant topic, with the financial crisis, China's enterprises to accelerate the pace of mergers and acquisitions, but from an overall point of view, China M & a success rate is not high, analyzes the financing risk of enterprise merger and acquisition of the bank loans, can provide a reference for the enterprise in M & bank loan financing risk control.
With the development of the global financial crisis, the world economy will present a kind of new pattern, mergers and acquisitions have become more and more serious, Chinese enterprises have started to high-profile mergers and acquisitions of transnational M & A, such as aluminum acquisition of Rio Tinto, China Minmetals acquisition of OZMinerlas, the domestic such as state machine group with China YITUO Group, the number of and the scale of mergers and acquisitions over the past, the Shanghai stock exchange President Cai Min said China has entered into mergers and acquisitions, restructuring and joint of the "golden period of ten years", but from the Chinese history of M & a vogue enterprises, especially multinational and purchase history, the success of enterprise M & A case is not rare.Faced with various problems will be M & a process, including the choice of the target enterprise, the target enterprise value assessment, M & A financing and payment options, and the management and financial integration after M & A, of which, the financing is a key link in the merger of enterprises, in terms of the merger and acquisition of Chinese enterprises financing, financing amount of internal financing is very limited, and the higher cost of equity financing, lasted longer, and limit the conditions are very harsh, and some innovative financing way in our country still does not see more, so the choice of M & A enterprises in financing the general tend to choose debt financing, especially financing loans from the banks or other financial institutions in the way.Therefore, this paper only debt financing risk in enterprise merger and acquisition is analyzed, to face the enterprise M & A to provide a reference in theory and practice.
a bank loan financing, mergers and acquisitions in the
Enterprise merger and acquisition financing and other cases of financing is different, enterprise mergers often requires a large amount of funds, and these funds are generally in a relatively short period of time to raise and use; and mergers and acquisitions in the merging party usually larger in size, strength, financial soundness, M & A and can further expand the scale of enterprises or the synergy effect finance, management and marketing, so the enterprise merger and acquisition of the bank loan financing are more likely to get the support of the bank.Bank loans can enlarge leverage in a certain extent, to increase shareholder returns, but on the other hand, too much debt will make the unbalanced capital structure of enterprises, increase the enterprise debt service pressure, make the enterprise is facing greater financial risk, enable enterprises to enter the financial difficulties or even bankruptcy.
(a) the advantages of bank borrowings
Bank borrowings include borrowing from banks or other financial institutions must be in accordance with the contract, the way of principal and interest of the medium and long-term loans and short-term loans.In accordance with the loans without collateral as security, can be divided into the mortgage and credit loan.Compared with stock and bond financing, bank loan financing has the following advantages:
1 financing speed
Enterprises use bank loan financing, generally for a relatively short time, the program is relatively simple, can quickly obtain the required funds.And the issuance of stocks, bonds, before being released on the need for a lot of preparation (such as a certified public accountant audit), issue also needs some time, program is complicated, time-consuming.
2 a lower cost of capital
The cost of capital can be used with capital cost ratio and the actual funds raised to measure.The bank loan financing, the interest can be in pre-tax expenses, thus can reduce the enterprise actual burden with capital costs, so relative to the offering of equity financing, capital cost rate is low; compared with stock and bond financing, bank loan belongs to the indirect financing, financing costs less.
3 bank loan flexibility
Enterprises in the loan, enterprise and bank direct loan amount agreed, duration and interest rates; in the use of capital, enterprises as a result of specific reason is unable to repay the principal and interest on time, can also be negotiated rollover, and so the banks, bank loan financing has strong flexibility.
4 can make full use of financial leverage
Enterprise merger and acquisition financing in the use of bank loans, and bond financing, can give full play to the role of financial leverage, capital cost rate is lower than the rate of return on investment circumstances, can enlarge the shareholders within a certain range of the rate of return on investment.
(two) the bank loan program
Bank loan procedures generally include application, examination and approval, the bank signed the loan contract, enterprise acquires the loan in accordance with the contract, the use of funds and in accordance with the prior agreement of the way of repayment interest, in this no longer in-depth discussion.
two, M & a bank loan risk and its causes of financing is facing
(a) the target enterprise value assessment of risk
In the enterprise merger and acquisition, the value assessment of the target enterprise is the basis of merger and acquisition pricing, which is the basis of a reasonable amount of financing.Therefore, if the value of the target enterprise, namely the assessment value of assets and profitability, slightly careless, it is possible that M & A for M & A costs are too high, more than the capacity of its own, resulting in excessive rate of assets and liabilities, so that enterprises in the financial crisis, mergers and acquisitions are not up to the expected effect caused the failure of M & A.The target enterprise valuation depends on the future income of the size and timing of expected.But in the actual M & A activity, because of mergers and acquisitions too optimistic, and the management of M & A are arrogant tendency, and the method of valuation of improper use, to the goal enterprise value estimated the possibility is very big.
(two) the loan credit risk
Only the timely, adequately and to raise the necessary funds, in order to achieve the expected acquisition.While the merger process of bank loan financing amount depends largely on the enterprise merger and acquisition cost.Enterprise merger and acquisition cost generally includes the following three parts (Zhang, 2008):1. acquisition cost.The acquired company's stock or assets purchase price. must present debt refinancing bear or expires.The purchase management and tax cost.The paid professional fees.2 operation cost.3 after the acquisition integration cost.The enterprise must combine the target enterprise value assessment and pricing, and enterprises owned funds rationally determine the required amount of financing.The financing amount in general should be slightly higher than the cost of the acquisition, in addition to meet the payment, shall also ensure that enterprises sustained steady operation, corporate borrowing too much will increase business interest burden, affect the company's ability to pay, liquidity risk facing higher, once the enterprise is not in accordance with the contract of debt servicing, and banks do not agree extension and other matters, will seriously affect the credibility and reputation of the enterprise, the enterprise itself will face a penalty or even bankruptcy and liquidation risk.Therefore, enterprises should reasonably determine the amount of financing in financing before.
(three) liquidity risk
The bank loans financing mergers and acquisitions, M & a strong request immediate cash payment ability, liquidity risk and usually larger.Our country enterprise in the merger trend in the payment to choose cash, the cash payment must first consider the mobility assets, current assets and current assets of higher quality, liquidity is stronger, more enterprises can quickly, smoothly obtain the acquisition and subsequent development fund.M & A activity will liquidity resources occupied by a large number of enterprises, thereby reducing the rapid reaction of enterprise to external environment change and adjustment, increased the operating risk of an enterprise.If private surplus funds shortage, banks may require the enterprises to mortgage the various main asset, use or restriction of monetary funds and other assets, and usually the target enterprise assets and liabilities rate is very high, so that after the merger of enterprises debt ratio rises significantly, safety of capital reduction.If the acquirer's management ability is poor, the cash flow of improper arrangement, liquidity ratio will be substantially reduced, affect the short-term debt-paying ability, to the acquiring party bring liquidity risk.
(four) the capital structure of the risk of deterioration
Enterprise's capital structure is composed of equity capital and debt capital (i.e. foreign long-term debt), namely the equity capital and debt, long-term funding source enterprise capital ratio capital structure.Capital structure can show that the business owners to its own capital ability to bear responsibility for its debts, the normal ratio should be maintained at about 1:1 (different industry different).Mergers and acquisitions in the bank loan financing mode in the M & A of enterprises, increase enterprise debt ratio will lead to capital structure deterioration, caused the credit crisis, which will affect the company's ability to refinance.At the same time, if the enterprise's financial situation is poor, and the formation of an operating loss for the recovery of funds, rights and interests too little capital, debt capital is too high, it will increase the merger of the enterprise in the process of integration in the intangible burden of debt.Dependence on bank loan financing for large-scale M & A activity will lead to corporate debt maturity structure formation of high financial leverage and high risk, which brings great financial risks.
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