On the Financial Problems of Mergers and Acquisitions

[Paper Keywords] M & Financing Strategies
[Abstract] In the modern market economy, mergers and acquisitions of enterprises to capital expansion, and enhance the competitiveness of an important and effective means. Acquisition financing is one of the implementation phase of the program is one important prerequisite for mergers and acquisitions. Based on the analysis of corporate finance in the induction of M & A representative problem, a need to actively explore new financing channels, and enhance the role of M & A funds to expand overseas financing, improve relevant Laws and regulations and recommendations to improve the relationship between banks and enterprises.

In the modern market economy conditions, enhance the vitality of the enterprise mergers and acquisitions, improve economic efficiency, to achieve external expansion, integration of resources to enhance the competitive advantage of an effective way. In the conduct of mergers and acquisitions, acquisition financing is an important success for one of the premises.

First, China's current financial problems M & A
M & M financing on the capital structure, liquidity, solvency and other issues have important implications, financing, financial problems in a combined enterprise plays a pivotal role. Reform and opening, China's market economy and the stock market further improve the financing of mergers and acquisitions in China played a very big role. For the West merger, its presentation of diverse M & A financing, a one-time funding to the Development of the financial institutions play an important role in such trends. when compared to that in our country the Development of mergers and acquisitions, financing of corporate mergers and acquisitions, there are still inadequate, mainly in the following areas:
(A) the limited size of its own funds
For the present, China's enterprises, the enterprises are small, limited profitability, the number of retained internal funds is not, to be accumulated to a large amount of funds required for mergers and acquisitions business is not easy, but the funds needed to complete the amount of M & A activity is very large. small internal funds, while the M & A takes a huge amount of money, so, completely or most of the mergers and acquisitions with own funds would reduce the flexibility of operation, a substantial increase in liquidity risk, there is the possibility of payment difficulties.

(B) Commercial bank loans are not sufficient
Loans from commercial banks can make up for lack of internal finance, but also not easy to commercial bank loans, usually commercial banks, loan companies need to be conducted on strict examination and control, including the acquisition of the company's financial status, credit status, Development review of the future, and even agreed a number of restrictive clauses, only those companies to get the strength of strong support from commercial banks. But in reality, the commercial banks in corporate finance in mergers and acquisitions failed to play its due role in promoting. The reason is that China's state-owned enterprises do not have the capital to form an effective complementary mechanism, most of the enterprises operating in the state of high debt, the average debt rate is about 6o%, the bank's creditors as a business, should ensure that their rights are not the same time, some enterprises during the process of debt restructuring, trying to avoid bank debt, the bank assets is difficult to preserve, to fight the banks involved in M ​​& A finance initiative.

(C) obstruction of bond financing
Bonds need to have a greater attraction to attract investors. But the issuance of bonds subject to state control of the scale, business can not be based on the needs of the environment and their own decision to finance acts. The state has strict entry bond conditions and approval procedures , including "" Enterprise Bonds Regulations>> states: "The corporate bond interest rate shall not exceed the same period of household savings bank interest rate 4o%." When interest rates decline, the purchase will decline in the attractiveness of bonds. In another example, the bond issuers limit the amount of net assets, issue bonds to raise funds use restrictions. all of which hinder the enterprises to use bonds to raise funds, blocking the channels of financing for SMEs.

(Iv) equity financing difficult
As China's securities market Development is not perfect, the market capacity is limited, therefore, the issue of shares has a strict policy and regulatory constraints. <<Law Securities Law >>,<< >>,<< temporary stock issuance and transaction management Bill >>,<< IPO management practices of listed companies>> and so the main issue credit on the stock, profitability, and so there are strict requirements. For the SMEs, their credit is not high, financing small-scale, high cost, want to stock market is even greater difficulty of financing.

Second, to improve the problem of corporate finance M & Strategies
As stated above, in China, M & A financing channels are limited, the financing of enterprises there are many obstacles, which would seriously affect the M & A and lead to financial problems. The following companies on mergers and acquisitions financing problems proposed in this paper:
(A) improve relevant Laws and regulations, industrial policy
1. Law Construction
To the reality of the current case, the primary difficulties in financing mergers and acquisitions is the external constraints, to promote mergers and acquisitions, to expand financing channels broader efforts should be made to create a good environment for the financing. In the previous discussion of the relevant laws and regulations over the financing of mergers and acquisitions impact, especially on issuing new shares and restrictions on issuance of shares, resulting in some enterprises are excluded, "<>>,<< Law Securities Law>> and the related regulations, notices, etc. to provide a basis for the acquisition, with the acquisition of Development in China, there are still inadequacies of its laws and regulations need further improvement, corresponding to relax restrictions on the acquisition financing.

2. Industrial Policy
In the industrial policy, development of SME industrial clusters to solve the problem of financing mergers and acquisitions as part of the good measures. Scale industrial clusters of SMEs to overcome the lack of an effective way to improve competitiveness, on the other hand proved relatively small and medium enterprises in clusters a good solution to its financing problems. industrial clusters can promote the development of private financing and broaden the financing channels for SMEs. cluster of business owners loans through personal relationships, both parties because of geographical understanding, some classmates and friends and even brothers and sisters, lower degree of information asymmetry, risky lending. From the practical point of view of the present, the formation of industrial clusters in the form of a variety of private financing, for example: between the owners of "credit" or delay the payment of processing fees be paid the way, loans based on trust "folk banks", etc., to form a unique cluster environment for increased industrial and trustworthy business degree, help enterprises to enter the capital markets for direct financing, industrial clusters have a certain scale, the financing large economies of scale and multiplier effects, it has formed a network to enable enterprises to reduce the possibility of evasion of debts, reduce transaction costs of banks and financial institutions risk. reposted elsewhere in the Research Papers Download http://www.hi138. com (b) Construction of M & A market
1. Further develop the securities market
Mergers and acquisitions and securities markets closely linked, we must vigorously develop the securities market in order to promote the development of China's M & A market. This mainly refers to the stock market and bond market. In the circulation the reality of the preliminary settlement, the size of non-on efforts to solve pressure circulation, restore the basic functions of the securities market. In addition, due to various reasons, the development of China's corporate bond market in the speed, scale and variety so seriously lagging behind the corporate bond market and the capital market pales in comparison. <<State Council on promote capital market reform and stable development of>> the nine views and the State Department report on the development of corporate bond market have mentioned, should be further implemented.

2. Development agency
Strive to foster the investment bank, represented by intermediaries to enable them, with their strong financial strength and skilled operation of capital markets technology, mergers and acquisitions provide good financial services. In developed countries, almost all M & A activities are in the intermediary the organization and participation to complete, but not many such cases in our country. In developed market economies, under third-party professional division of labor can greatly improve the efficiency of market operations. Therefore, China should give full play to carry out mergers and acquisitions investment bank The role of intermediaries such as full use of investment banking and securities company's capital strength, credit strengths and information resources to provide services for enterprise mergers and acquisitions.

3. M & M to play the role of the Fund
M & A funds are mutual funds innovative varieties, 80 in the 20th century acquisitions of U.S. businesses play a role in both shared a common fund "collective investment, business experts, spread the risk, the common income" characteristics, because of a a clear direction of investment and unique, showing a high-yield, fast funding and services for the characteristics of mergers and acquisitions. fund business development in China's securities market has just started, and M & A special fund is empty, but the organization better for our companies understand and accept. In particular, can have a plan, selected pilot buyout funds, the establishment of the issuer, on the feasibility and specific program funds Research, you can choose the impulse of large enterprises, or mergers and acquisitions economic characteristics of large scale industries and sectors as the main issue, the State may allocate funds or specialized agencies involved in the initiation.

(C) to improve their own M & A Policy
1. Optimize the financing payment
Way to raise funds to pay the way to way to raise funds to pay in cash the greatest pressure, often in installments can be taken to alleviate the financial strain of. M & A business can be paid according to their own situation on the way to design, reasonable arrangements for financing combination of methods, such as: the two-tier tender offer bid in cash the first layer, second layer hybrid securities as a payment method. using this form out of large transactions, the buyer paid cash consideration of limited capacity can maintain a reasonable capital structure, reduce the huge amount of repayment pressure, to reduce risk. At the same time can induce commitment to sell the target company shareholders as soon as possible, so that the M & A side in the first tier bid to achieve the target company for the purpose of control.

2. Ways to encourage acquisition of convertible
In terms of payment, in cash or assets on the basis of traditional mergers and acquisitions, particularly involving cases of M & A Value huge encouraged to achieve through the stock swap merger. With cash or assets compared to mergers and acquisitions, equity takeover is irreplaceable advantages, such as the huge volume of financial transactions make a lot of mergers and acquisitions to become a reality, to avoid the result of one party to win the other party out of the situation and achieve win-win situation, both the elements conducive to integration of acquisitions, which is the integration of emerging industries The purpose to be achieved, so that's big in the "She Tunxiang" possible .20 century 9o's, the international community has accepted as a stock swap merger transactions, particularly mergers and acquisitions in the behavior of large multinational companies. With with a new form of state-owned assets management system, equity acquisition will be China's capital market should be the main form of industry consolidation mergers.

3. Full use of overseas funds to expand overseas financing
China, as emerging economies, developed countries have been increasingly attracting the attention of the capital market, capital market developed its own internal development needs and competition needs of emerging market companies to join. So far, there are many enterprises listed overseas. With further development of the Chinese economy and the deepening of global economic integration, foreign financing will become a new trend, to become one of the options of financing mergers and acquisitions. developed market economies, practical experience shows that to solve the problem simply a way to finance mergers and acquisitions , a way to have little effect, it is necessary through a variety of channels and a variety of ways to solve them. Links http://www.hi138.com Research Papers Download