What is the exit method of M&A fund? How's it going?
M&A fund model:
There are many restrictions for M&A funds to use leveraged financing in China. Therefore, there are very few domestic funds that really have the ability to engage in leveraged buyouts independently. Especially under the background of supply-side reform in recent years, the operation of M&A funds in China has its own unique characteristics, including the following three types.
1. M&A Fund Model Reform of State-owned Enterprises
In recent years, the reform of state-owned enterprises has provided fertile ground for the development of M&A funds. On the one hand, under the economic background of structural upgrading and deleveraging, state-owned enterprises need to transform through the rapid development of M&A, and the fastest way is to establish M&A funds in cooperation with PE. On the other hand, due to various reasons, M&A state-owned enterprises are short of talents and encounter many difficulties in negotiating with the target enterprises. Therefore, they can appear as third-party shareholders in the target enterprise through M&A fund, which can easily bypass the above disadvantages.
2. "Listed Company+PE" M&A Fund Model
Since 20 1 1, Silicon Valley Paradise and Dakang Animal Husbandry initiated the establishment of the M&A Fund, and the M&A Fund of "listed company +PE" officially became popular in China. The main operation process of this model is as follows.
In this mode, PE cooperates with listed companies to set up M&A funds to promote industrial transformation and upgrading of listed companies. Generally, the contribution of listed companies and PE is 10% of the total fund. As the general partner of M&A Fund, PE is responsible for the operation and management of the partnership, and the remaining 80% of M&A Fund is raised by PE, the investor.
This model is the leverage ratio of listed companies 10 times. With the help of PE's project resource advantages and investment management capabilities, M&A funds are promoted to merge or participate in upstream and downstream enterprises in line with the development strategy of listed companies through industrial integration and mergers and acquisitions. The listed company signed an agreement with PE to buy back the equity of the target company, and after the comprehensive operating performance of the target company reached the agreed profit standard, it sold the equity of the target company to the listed company to realize the withdrawal of funds.
3. Insurance funds enter the M&A market.
In recent years, the M&A market has seen the acquisition of listed companies by insurance companies. Compared with the traditional M&A fund, the insurance companies of the acquirer do not belong to the fund. In China, due to the limitation of leverage ratio, it is difficult for M&A funds to obtain enough capital for acquisition through loans and other channels. The acquirer is mainly an insurance company, which can control large listed companies through insurance funds, margin financing and securities lending, for example, Baoneng acquired Vanke by placard. (Part of the source: Xiang Economic Research Institute)