With the deepening of enterprise reform, M&A activities between state-owned enterprises, between state-owned enterprises and non-state-owned enterprises, between listed companies and non-listed companies, and between domestic-funded enterprises and foreign-funded enterprises have flourished. The increasingly active M&A activities put forward higher requirements for the soundness and perfection of financing mechanism. In order to better promote the reform of state-owned enterprises and extensively carry out M&A activities, enterprises actively expand external financing channels while deeply tapping their internal potential and vigorously raising their own funds. With the rapid development of modern capital market, especially the securities market, more and more M&A activities are carried out through the securities market and the property rights trading market, and the financing function and resource allocation function of the capital market are increasingly reflected.
Most acquisitions are by agreement, mainly by direct cash payment, and rarely by stock exchange and merger. The main funds of M&A in China come from the funds accumulated during internal shareholding, initial public offering (IPO) and additional rights issue. Due to many restrictions on China's foreign financing, foreign financing has not been well developed, and many enterprises are on the edge of policy when financing. In the transaction announcement, the specific financing arrangements of the enterprise were not fully disclosed.
With the adjustment of China's industrial structure and the intensification of enterprise competition, the scale and frequency of M&A will become larger and larger, and it will be difficult for enterprises to meet the requirements with their own funds. For example, how to expand external financing has become an important issue for enterprises. With the emergence of MBO in China, financing channels have become the bottleneck restricting the transformation of corporate governance structure and scale expansion.
In terms of financing methods, there is not much difference between China and foreign countries, and the financing methods available for enterprises are relatively complete. However, when it comes to mergers and acquisitions, the available financing methods are very limited, mainly because the existing laws and regulations in China have strict and specific provisions on the application of various financing methods for the sake of avoiding risks. From the perspective of equity financing and debt, there are mainly the following situations: issuing stocks, equity agreement financing, issuing bonds (including convertible bonds), lending and free allocation.
Free transfer is a unique phenomenon in China's state-owned economy. It refers to the property right reorganization behavior that the government exercises the ownership of state-owned assets on behalf of the state and transfers the property right of the target enterprise to the acquirer free of charge through administrative means. The advantages of this method are low transaction cost, low resistance, high speed and strong property rights integration, and the acquirer often enjoys various preferential policies given by the local government. The disadvantage is that it is easy to have administrative actions against the will of the enterprise, which makes the acquirer bear a heavy burden. Free transfer in violation of market rules is difficult to achieve the strategic development goals of enterprises, and forced merger between enterprises leads to a series of problems in the post-merger integration process. The acquirer is often dragged down by the debt or poor operating conditions of the acquired party, and the real purpose of M&A cannot be achieved. Lanling Group's acquisition of Yuhuan shares, FAW Group's acquisition of Yunnan Blue Arrow, and Tianjin TEDA's acquisition of Meilun shares were all carried out through free allocation.
(2) Existing problems
1. The financing channel is narrow and single.
In the current situation of poor corporate efficiency, the internal financing provided by enterprises for M&A is very limited. The three main aspects of external financing, namely, bank loans, issuing stocks and issuing corporate bonds, also have different degrees of restrictions.
2. The unreasonable ownership structure of listed companies, small circulation and small proportion have artificially increased the financing demand of mergers and acquisitions, thus hindering the smooth progress of mergers and acquisitions.
With the further improvement of the ownership structure of listed companies in China, the asset restructuring of listed companies will increasingly adopt the acquisition method. However, due to the particularity of the shares of listed companies in China, the proportion of tradable shares is low, so this method often costs the acquirer several times more than the transfer of non-tradable shares. The increase of M&A cost will undoubtedly lead to the increase of financing amount, thus increasing the risk and success rate of financing.
3. Lack of financing tools.
China enterprises mainly rely on bank loans and stock issuance to raise funds during M&A, and the financing tools are relatively monotonous. Coupled with the defects of the capital market itself, it is even more difficult to finance the funds needed for mergers and acquisitions.
4.M&A financing has not really achieved marketization.
Many M&A activities are planned and arranged by the government, not voluntarily by enterprises, so the problems encountered in M&A financing also depend on the government to solve, which will also affect the financing needs of other enterprises.
5. Merger and acquisition of enterprises through market means should not only consider the capital status before the merger, but also consider the capital injection after the merger.
M&A funds are paid to the owner of the target enterprise and do not enter the target enterprise; The capital injection after M&A and the loan repayment during M&A financing play a vital role in enterprise operation and are also the key to the success of M&A activities. At present, M&A only pays attention to M&A's capital demand at that time, and lacks the preparation for re-injecting funds after M&A, which not only easily leads to the abandonment of M&A activities, but also wastes the funds invested in the early stage.
6. As the main channel of external financing, the B-share market has many problems, mainly including:
(1) The market scale is small. Although the scale of China's B-share market is expanding year by year, the expansion speed is relatively slow, resulting in a small market scale. On the one hand, it weakens the investment interest of large international institutional investors, on the other hand, it makes the ability to resist the impact of international hot money more fragile.
(2) Poor market liquidity. Compared with the A-share market, the B-share market is light and the turnover rate of individual stocks is low. In order to digest a certain amount of selling, it takes a long time to accumulate enough buying and complete the transaction. Therefore, in a small-scale market, when the seller is dominant, the whole market will not be optimistic. The low liquidity of the B-share market leads to a small number of people entering the market, and large funds cannot be dispatched, making it difficult to get in and out, thus causing the market to fall into a vicious circle of poor liquidity-less funds, more people entering the market-poor liquidity.
(3) There are few listed companies with good performance and high quality. Among the existing B-share listed companies, except for a few companies with excellent performance, a considerable number of listed companies have unsatisfactory operating conditions and low return on net assets. In connection with this, the information disclosure of B-share listed companies is still lacking, which is far from the requirements of investors. These problems have obviously hindered domestic enterprises from financing overseas through the domestic market. In order to effectively carry out enterprise mergers and acquisitions, we must open up more financing channels, use newer financing tools and establish a reasonable financing mechanism.
(A) seeking equity financing innovation
As mentioned above, in order to give full play to the role of equity financing in mergers and acquisitions, there are many obstacles in the existing equity financing methods, which must be innovated.
1. A new way of equity financing.
(1) directional placement. Directional placement is very common in western and Hong Kong capital markets. The biggest advantage of issuing company shares to specific investors to buy their assets is that joint-stock companies do not need to pay a lot of cash, thus making mergers and acquisitions easy to complete. China's capital market is in its infancy. Prior to this, this concept and practice were rarely used except for primary issuance and allotment. At present, some listed companies issue shares to specific investors, which has created a precedent of private placement in China capital market and found a new way for M&A financing.
(2) Issuing new shares. In the practice of capital financing in China, there are two specific forms of public offering of new shares by enterprises, one is initial offering, and the other is rights issue. The IPO mentioned here is aimed at the public, and it is neither a rights issue nor an initial public offering, so it has become the third public offering mode besides initial public offering and rights issue. Issue new shares. On the issue object, the new share issue broke through the single practice of placing shares to the old shareholders. According to the general rules of joint-stock companies, old shareholders generally have the priority to be transferred or subscribed, unless the shareholders' meeting agrees. Rights issue is a typical embodiment of this principle. Under the condition of rights issue, the choice of shareholders is either unconditional purchase or abandonment. When issuing new shares, the old shareholders can have the preemptive right and offer part at the same time, which is also a more practical practice considering the affordability of the old shareholders. However, in any case, the issuance of new shares other than IPO and rights issue will undoubtedly inject new elements into the M&A financing market and promote the further development of enterprise M&A. ..
2. Standardize the development of OTC securities market.
In order to better realize the innovation of equity financing methods, we should vigorously cultivate the secondary market transactions of securities and take effective measures to standardize the development of the OTC market, which is an important condition for enterprises to raise funds through the capital market. Through over-the-counter trading, securities brokers or securities companies directly buy and sell unlisted securities with customers, sometimes including a small number of listed securities, without going through the stock exchange. As two different trading forms in the securities market, OTC and OTC can meet different trading needs and finance M&A enterprises.
(B) to expand the proportion of bond financing
At present, the scale of corporate bonds in China is too small, far behind stocks and national debt, which is in sharp contrast with the rise of debt financing and the decline of equity financing worldwide. Since 1980s, debt financing has become the main means of financing for enterprises in developed countries, and its proportion in the international financing market is also expanding. The size of the US bond market is about five times that of the stock market. In particular, companies with good performance are worried about giving their equity to others and pay more attention to bond financing. In order to adapt to the future development of China's economy, we should pay more attention to the bond market while actively developing the stock market, so that corporate bonds can develop normally and become a main channel for direct financing of enterprises. Developing bond financing should be the main task at present.
(3) Make full use of new derivative financial instruments such as convertible bonds and warrants to reduce the financing cost of M&A..
Convertible bonds provide holders with the option to convert bonds into stocks at a certain price within a certain period of time. As a new financing tool of M&A, the biggest advantage of convertible bonds is that they can be issued at lower interest rates and more favorable contract terms than ordinary bonds, thus greatly reducing the financing cost of M&A. At the same time, when the company successfully passes the M&A period and enters the development, bondholders can exercise equity conversion, which can avoid excessive debts of the company after the acquisition and reduce the financial risks of the company after the acquisition. In the initial stage of a large number of mergers and acquisitions, due to the huge pressure of debt service, this is undoubtedly a better financing tool. Warrants can also enable enterprises to raise a large amount of funds at low cost or even zero cost in the process of mergers and acquisitions, but they have not been widely used in mergers and acquisitions in China. Therefore, Chinese enterprises should learn from foreign experience in M&A financing, and make full use of new derivative financial securities such as convertible bonds and warrants as effective M&A financing tools while developing the capital market.
(d) Pilot commercial paper financing.
In view of the short-term huge capital gap restricting the smooth progress of enterprise mergers and acquisitions, issuing commercial paper is an effective solution. In foreign countries, bill issuance financing is a medium-term circulating commercial bill financing, and it is a financing method for large enterprises with good reputation to raise short-term funds in the financial market by means of commercial bills. Because commercial paper is an unsecured paper, only those large companies with large capital scale, good operating efficiency and low financial risk can issue commercial paper for financing. Its distribution targets are mainly professional investors and financial institutions.
The characteristics of bill issuance financing are mainly reflected in low financing cost, full flexibility, wide sources of funds and diverse choices of borrowers.
The merger and reorganization of enterprises in China needs a lot of financial support, and this huge demand for funds also provides room for the development of bill financing. Compared with other financing methods commonly used by Chinese enterprises at present, bill issuance financing is more flexible than corporate bond issuance financing, and different financing strategies and contingency measures can be adopted at any time according to changes in the market and capital supply and demand. At the same time, commercial paper financing can avoid the increase of opportunity cost brought by other equity financing methods. Therefore, bill issuance financing should be a realistic choice for M&A financing of China enterprises.
(5) M&A loans granted by commercial banks
In broadening the financing channels for mergers and acquisitions of enterprises, commercial banks are encouraged to issue special loans for mergers and acquisitions directly to enterprises, and closed management and special account use are implemented. The state gives preferential policies to banks that provide loans in terms of interest rates and repayment periods under the conditions that loan enterprises can afford. Commercial banks directly providing M&A loans to enterprises will effectively promote the smooth progress of M&A and improve its performance.
(six) the use of overseas securities market financing.
In addition to actively asking for financial support at home, China enterprises should also vigorously expand overseas financing channels. In the international capital market, the financing mode shows the trend of securitization, that is, a large number of financing instruments appear in the form of securities, which has changed greatly compared with the situation of loans in the past. This development trend of international capital market brings good opportunities for China enterprises to carry out international M&A financing.
(seven) the use of asset securitization financing
Asset securitization, as an innovation of financing method, is a new thing for China, although it has been very mature and popularized to a certain extent in developed countries. The essence of asset securitization is the replacement of stock assets and monetary funds of enterprises. Investors mainly rely on the quality of asset portfolio and the reliability and stability of future cash flow, and put the credit ability of asset sponsors in a relatively secondary position. Through asset securitization, we can not only achieve the purpose of M&A financing, but also improve the quality of existing assets, speed up asset turnover and capital circulation, and improve the rate of return on assets and capital utilization. Therefore, asset securitization can be used as a new financing tool for M&A activities of China enterprises.
(eight) relax the restrictions of laws and regulations on enterprise mergers and acquisitions, and provide legal sources of funds for enterprise mergers and acquisitions.
Buyers who buy listed companies usually need to raise a lot of money, especially in the case of cash purchase. At this time, it is often necessary to turn to capital market financing. Looking at M&A cases in developed countries' capital markets, almost all of them are accompanied by huge external financing. However, at present, China has set up many obstacles to raise the funds needed for M&A, which hinders the normal M&A, causes a large number of enterprises to operate illegally for M&A financing, makes the relevant laws and regulations ineffective, desecrates the seriousness of laws and regulations, and seriously disrupts the order of the capital market. Therefore, it is wise to amend the existing laws and regulations as soon as possible to legalize the necessary capital channels for normal mergers and acquisitions.