[Abstracts] to choose a reasonable way to pay not only to the success of mergers and acquisitions related to both income and changes in the structure of financial arrangements for corporate interests. In this paper, choice of payment method and influencing factors were analyzed, and make recommendations for selecting M & payment method.
Keywords: mergers and acquisitions; cash;; pay equity payment
In recent years, the state has adopted policies to encourage mergers and acquisitions, China's M & A market transaction size and the number of cases completed basic showing growth. M & A deals as a payment in the last loop, and mergers and acquisitions of both shareholder value, choice and purchase price is directly related to mergers and acquisitions of financial strategies. And different choice of payment method on both sides of M & A financial impact is different, select the appropriate payment instrument or not, not only to achieve the acquisition strategy, but also exhibit different acquisition value of information, or even determine whether the deal will succeed.
Second, compare M & Payment
The main M & Payment Western countries are: cash mergers and acquisitions, equity mergers and acquisitions, leveraged buyouts and mergers integrated securities; mergers and acquisitions of Chinese enterprises in addition to the above four methods of payment, there are replacement of assets, mergers and acquisitions bearing debt, and other countries with Chinese characteristics free transfer payment. In this paper, the two most common methods of payment: cash payment and equity comparative analysis.
(A) cash payment. Cash payments are mergers and acquisitions practice in the use of up to one payment, but it is also the most convenient deal, clear, easy way to pay. Cash and generally relates to the valuation side, the two sides once defined the transaction price, which can quickly complete the deal. Therefore, the scope of our cash broader: in mature industries buyout firms typically cash payment; horizontal M & A; or in the case of a hostile takeover bid; enterprises in the internal capital accumulation more monetary liquidity good, reasonable structure and long-term assets; when the acquired company's management convinced the market seriously underestimated the value of their stock, have full confidence in M & a; long-term debt at lower costs or increased slowly. Cash has significant advantages: the valuation is relatively simple, and convenient procedure, without changing the existing ownership structure of enterprises, passing out adequate cash flow, the ability to make use of information on investment opportunities. But the disadvantage of cash is quite obvious: With the growing size of the acquisition, the simple use of cash will bring tremendous pressure on cash, for the parties concerned to be paid in cash and will bring a heavier tax burden.
(B) equity payment. Equity payment in our M & A practice also has many forms, including convertible capital increase, shares of convertible stock, convertible stock repurchases and the like. Equity payment applies to start-up and growth companies, most of them need a lot of cash into research and development and other activities, and its stock due to its good growth and also easy to be accepted by the parties; the same due to the financial risk and default risk existence, equity payment also applies to higher asset-liability ratio of the enterprise; strategic M & M because of the need to work closely both sides, more appropriate use of cross-shareholding equity payment. M & A parties when using the equity payment, mergers and acquisitions, the acquirer does not need to pay large amounts of cash, do not have a lot of cash outflow, you can make a relatively large-scale mergers and acquisitions for the combined company to provide a good financial environment, greatly reduced operational risks. Is held by the acquiring party and the party should bear the risk of the combined equity of new enterprises, enterprise management papers but may also enjoy the additional revenue brought about by rising stock acquirer, tax-deferred and can play a role; and M & A side due to the issuance of shares changed equity structure of the company, the original shareholders equity dilution. At the same time, using the issuance of new shares cumbersome procedures will extend the acquisition time, a potential risk of failure.
Third, M & Payment Options Internal Factors Analysis
In our current market environment and institutional context, select the choice of payment method is not only determined by the market environment and institutional context our country, but also by the combined effect of many complex factors. The many factors are divided into two types of internal and external factors were analyzed. Internal factors affecting the acquirer Payment Options are: M & A or strategic purposes, financial situation and holding structures, mergers and acquisitions and financing ability.
(A) acquisitions or strategic purposes. The purpose of acquisition or development strategies of enterprises will have a profound impact, so no matter from the perspective of theory and practice, the purpose of acquisition or strategic acquisitions are bound to influence the choice of payment method. In China, the main purpose of mergers and acquisitions can be divided into RTO, financial restructuring, strategic restructuring three.
1, RTO select payment method. From the perspective of the acquirer, RTO M & A payment is the optimal choice of assets to pay, on the one hand there is the will RTO companies for listing and financing, which are often poor financing channels, such as cash payment, may make the original tense cash flow worsened, a heavier burden on financial risk; the other hand, due to the quality of the business case itself is often not high, through the acquisition of quality assets to be injected into the acquiring party and the party to replace the existing non-performing assets, through a clean shell company to achieve the purpose of the listing, mergers and acquisitions are often able to achieve a win-win for both sides. However, due to RTO purpose is strong, and sometimes the lack of long-term strategic considerations, and the party is the controlling shareholder in order to avoid the risk of uncertainty after the M & A side acquisitions main business, there is often a strong desire to cash, so both games the end result is likely to pay for the assets, the assets plus cash and cash payments in kind.
2. Select the payment of financial restructuring. Financial Restructuring M & A payment optimal choice is the purpose of cash payments, financial restructuring is to improve the quality of financial and avoid financial risks, optimize the capital structure, increase the book profit. Is generally poor management and enterprise scale is small, flawed governance structure, corporate mergers and acquisitions in the financial sector are often virtual enterprise or other economic enterprises, generally do not have the industrial base related entity, through its strong financial capital strength, reconstruct the target company governance structure, not related to specific operations, often of a non-cooperative acquisitions, so the lack of payment transactions underlying assets or equity payments. Financial Restructuring M & A often have the following characteristics: M & A object having short-term nature; industrial structure did not significantly enhance the core competitiveness not significantly increased; one-time realized gains, increase in M & A year profit; most of the M & A business in order to maintain the shell or acquire rights issue , additional qualifications for the purpose.
3. Select the strategic restructuring payment methods. Payment strategic restructuring Mergers and Acquisitions of equity payment is the best choice. M & A strategic restructuring designed to improve the company's industrial structure, foster their core competitiveness and further enhance the company's value, both gains in mergers and acquisitions after the merger existence of ongoing business to be reflected. Acquiring party often wants to build its industrial chain, or with the parties and to achieve operating synergies, or from the original main industry to achieve strategic transformation, cooperative acquisition goodwill belongs. And to increase their investment by enterprises, the acquirer uses equity payment, access control through cross-shareholding between the two sides, is the ideal type of trading patterns strategic restructuring mergers and acquisitions. The cash payment will be and shall bear the sight of the capital gains tax, is not conducive to co-operate after the merger; although the use of assets to pay into the M & A business enterprise resources, but the two sides did not cross-shareholdings, we can not cooperate closely.
(B) financial condition and holding structures. Due to the increasing scale of today's mergers and acquisitions, a huge amount of the transaction, companies in mergers and acquisitions is bound to take into account the impact of the financial position and capital structure of the means of payment.