Mezzanine capital is a kind of profitable and risky capital form between enterprise debt capital and equity capital, and its essence is long-term unsecured debt risk investment. M&A Fund is a fund that focuses on M&A, the target enterprise. Its investment method is to acquire the control right of the target enterprise by acquiring the equity of the target enterprise, and then sell it after a certain period of restructuring and transformation.

Mezzanine fund is a financing source of leveraged buyouts, especially management buyouts. It provides funds between equity and creditor's rights, and its role is to fill the gap of acquisition funds that is still insufficient after considering equity funds and ordinary creditor's rights funds. The term MBO fund adopted in China actually refers to mezzanine fund. However, because the financing channels in MBO transactions are diversified, the financing structure is hierarchical, and the sources of funds, access methods, rate of return requirements and repayment methods are different. Is different, collectively referred to as MBO funds is not accurate.

The payment method of MBO is cash acquisition, not stock exchange acquisition, so acquisition financing is very important. In a typical MBO financing structure, the sources of funds include three parts:

1, 10% of the purchase price is provided by the management team, which forms the equity capital of the reorganized enterprise after the merger.

2. The purchase price is 50? 60% is provided by bank loans, forming priority creditor's rights, with enterprise assets as collateral, usually syndicated loans composed of several banks.

3、30? 40% of the purchase funds are provided by mezzanine funds.

The essence of mezzanine fund is a kind of loan fund, which provides funds and recovers funds in the same way as ordinary loans, but ranks behind bank loans in the repayment order of enterprises. Therefore, in M&A financing, secured financing methods such as bank loans belong to priority creditor's rights, and mezzanine funds belong to secondary creditor's rights. Junk bonds, which are very famous in leveraged buyout financing, are also a way to provide subordinated debt funds, and have the same function as mezzanine funds. However, due to the credit crisis in junk bond market after 1990s, the subordinated debt funds in western leveraged buyouts mainly come from mezzanine funds.

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