Analysis:

Financing is one of the key factors to determine the success of M&A. From the perspective of the development of M&A, the source of M&A's funds has always been one of the main bottlenecks restricting the large-scale strategy of M&A. Compared with foreign countries, M&A financing channels of listed companies in China are still not smooth, and the variety of financing tools is relatively single. With the development of listed companies in China from financial M&A to strategic M&A, it is increasingly important to learn from international successful experience, enrich the varieties of M&A financing tools in China and open up M&A financing channels. ..

1. M&A has a wide range of financing instruments in mature capital markets and is widely used.

1. Debt financing instruments

Debt financing is one of the oldest financing methods. In order to achieve M&A financing through debt, listed companies can choose to apply for loans from commercial lenders or other lenders, or issue bonds or bills, or auction and leaseback. The use of debt financing in mergers and acquisitions is generally applicable to the following situations:

(1) As debt financing will increase the debt burden of enterprises, the acquirer is required to have high debt tolerance and the ability to pay off debts safely; (2) To raise funds through debt financing, it is necessary to have feasible financing channels and tools; (3)M&A's debt financing is suitable for the extraordinary expansion of enterprises, while maintaining independence and avoiding diluting the original shareholders' rights and interests.

2. Equity financing instruments

With the gradual maturity of the capital market and the continuous expansion of M&A transaction scale, the proportion of equity financing in M&A transaction is increasing. It mainly includes public offering financing, stock exchange mergers and acquisitions and equity financing.

(1) public financing. That is to say, the price obtained by issuing new shares or placing new shares to the original shareholders is the price of M&A transaction. When choosing this method, we mainly consider the capital cost of the capital source subscribed by shareholders, the influence of capital increase and share expansion on their shareholders' control rights, and the adverse influence of capital increase and share expansion on financial indicators such as earnings per share, return on net assets and net assets per share.

(2) Stock exchange and merger. That is, the company's stock itself is paid to the acquired party as a means of payment for mergers and acquisitions. Usually, according to the different ways of stock exchange, it can be divided into capital increase stock exchange, treasury stock exchange, parent-subsidiary cross-share exchange and so on. Compared with cash mergers and acquisitions, stock exchange mergers and acquisitions have their own advantages: stock exchange mergers and acquisitions make acquisitions not limited by the scale of mergers and acquisitions; And usually change the ownership structure of both parties to the merger; It can avoid the pressure of short-term outflow of a large amount of cash and reduce the acquisition risk; In addition, you can also get tax incentives. However, the application of stock exchange mergers and acquisitions also has its drawbacks, which is one of the main reasons why stock exchange mergers and acquisitions are not widely used in the acquisition of listed companies in China.

(3) Equity financing. It mainly includes reverse repurchase, equity extraction and employee stock ownership plan. At present, there are certain laws and regulations on reverse repurchase and equity allocation in China. Employee stock ownership plan is not a financing method for mergers and acquisitions, but it has a unique financing mechanism. In the process of implementing the employee stock ownership plan, the leveraged employee stock ownership plan, which is guaranteed by the company and applied for special loans from banks or asset management companies, is widely used abroad and is worth learning from (see figure).

In the picture: A, the bank provides loans to employee stock ownership trust, and the enterprise issues guarantees for the loans; B. employee stock ownership trust uses loan funds to buy stocks from enterprises; C. The enterprise pays dividends to the employee stock ownership trust, and at the same time, the enterprise pays the enterprise endowment insurance premium to the employee stock ownership trust on a monthly basis; Employee stock ownership trust repays the principal and interest of bank loans.

Employee stock ownership loan in employee stock ownership plan is different from personal share pledge loan and legal person share pledge loan. The specific manifestations are as follows: ① When employees apply for a loan from a bank, they do not own the equity ownership, but use the loan to buy the equity and pledge it to the bank, which is similar to the housing mortgage loan. (2) Employees, as lenders, are employees of enterprises corresponding to pledged shares, and their debtors are closely related to pledged assets, so the corresponding loan risks will increase. In the general personal or institutional stock pledge loan, there is no such relationship between the lender and the pledged object. (3) The cash flow to repay the loan principal and interest comes from the dividend generated by the pledged equity; Generally, the return of personal stock mortgage loan comes from personal income, and the institution comes from the operating income of the institution.

3. Hybrid financing instruments

The application of mixed financing in mergers and acquisitions can be divided into mixed financing arrangements and mixed financing instruments. The former refers to the comprehensive use of various financing tools, such as bank loan funds, issuing stocks and bonds, stock exchange between M&A company and target company, issuing convertible bonds, preferred stocks, warrants and so on. , mainly represented by leveraged buyout; The latter refers to financing instruments with both debt and equity characteristics, including convertible bonds and warrants.

(1) leveraged buyout. The financing of leveraged buyout is mainly manifested as follows: the source of funds for leveraged buyout is mainly debt financing that does not represent the control right of enterprises; The liabilities of leveraged buyout are mortgaged by the assets of the target enterprise or repaid by its operating income, which is risky; Market intermediary organizations such as investment banks play a very important role in leveraged buyout financing; Leveraged buyout financing depends on the support of developed capital markets.

(2) Convertible bonds. Convertible bonds can be regarded as ordinary bonds with related options. In enterprise merger and acquisition, using convertible bonds to raise funds has obvious advantages: ① it can reduce the capital cost of bond financing; (2) Because the conversion price stipulated in the convertible bonds is higher than the market price of the common stock of the enterprise at the time of issuance, it is actually equivalent to providing financing for the enterprise to issue common stock at a price higher than the current share price; (3) When convertible bonds are converted into ordinary shares, the principal of the bonds need not be repaid, thus eliminating the burden of repayment of the principal.