China's corporate M&A financing channels are richer than before, including which

The biggest problem with M&A bonds than traditional methods such as M&A loans is that they don't have an advantage in information disclosure.

Internal

Internal financing channels mean opening up sources of funds from within the company to raise the funds needed for M&A. Including:

1. Enterprise's own funds

Enterprise's own funds are the part of funds accumulated in the course of the development of the enterprise, often held, according to the regulations can be disposed of by themselves, and do not need to be repaid. Enterprise-owned funds is the most secure, the most secure source of funds. Usually, the enterprise can use internal funds mainly after tax retained profits, idle assets sold and accounts receivable and other forms.

2. Unused or unallocated special funds

This part of the funds before it is not used and allocated, is a reliable source of funds, once the need to use or allocation of these funds, the enterprise can be paid in cash in a timely manner. Specialized funds are mainly funds used for economic activities such as upgrading, repair, trial production of new products, production development and so on. From the long-term average trend, this is a part of the enterprise can maintain a more stable flow of funds within the enterprise, with long-term possession, under certain conditions, can also be used for mergers and acquisitions activities.

3. Taxes and interest payable

While taxes and interest payable are debt in nature from the balance sheet viewpoint, from the long-term average trend, their origin is still within the enterprise, and they are a source of internal financing.

External

The external financing channel means that the enterprise opens up the source of funds from the outside, and raises the required funds for M&A from the economic entities outside the enterprise (including the existing shareholders of the enterprise and the enterprise's staff and employees). External financing channels can be divided into:

1. direct financing

Direct financing is not through the intermediary institutions (such as banks, securities companies, etc.) directly from the enterprise to the community financing. Direct financing is a financing channel often used by enterprises. In the United States, 70% of corporate financing is realized through the securities market. From the economic point of view, direct financing can maximize the use of social idle funds, the formation of diversified financing structure, reduce the cost of financing, and at the same time can improve the company's visibility through the issuance of securities. Enterprises can be financed through the issuance of common stock, preferred stock, bonds, convertible bonds, warrants and so on.

2. Indirect financing

Indirect financing means that the enterprise borrows funds through the intermediary organizations in the financial market, mainly including loans from banks and non-bank financial institutions (such as trust and investment companies, insurance companies, securities companies). Indirect financing is mostly expressed in the form of liabilities, the impact of which is similar to the issuance of bonds by enterprises. The difference is that, for one thing, due to the intervention of financial intermediary organizations, simplify the financing operation, but also increase the cost of financing; secondly, the enterprise facing the banks and other financial organizations, by the pressure is greater.