What are the forms of listing financing in China?

Debt financing refers to the acquisition of enterprises by taking on debts and raising the funds needed for mergers and acquisitions from others. This method mainly includes lending to banks and other financial institutions and issuing bonds to the society.

1, financial loan. This is the most traditional financing method of M&A, and its advantages are relatively simple procedures, low financing cost and large financing amount. But its disadvantage is that enterprises need to disclose their business information to banks, and they also need to be subject to banks in management. More importantly, in order to obtain loans, enterprises generally need to provide mortgages or guarantors, which reduces the ability of enterprises to refinance.

2. Issue bonds. The biggest advantage of this method is that the bond interest can be deducted before the enterprise pays the income tax, which reduces the tax burden of the enterprise. In addition, compared with issuing stock financing, issuing bonds can avoid diluting and lifting the ban on shares. The disadvantage of issuing bonds is that if too much bonds are issued, it will affect the capital structure of enterprises, reduce the reputation of enterprises and increase the cost of refinancing.

(2) Equity financing

Equity financing refers to the merger and acquisition of enterprises through stock issuance financing or stock exchange.

1, issue shares. Issuing shares means that an enterprise raises new shares by issuing new shares or placing new shares with existing shareholders.

Funds to pay the combined price. The advantage of issuing stock financing is that it will not increase the debt of enterprises. As a result of issuing stock financing, it has led to the expansion of enterprise assets and increased the refinancing ability of enterprises. Its disadvantage is that it dilutes the original equity ratio and reduces the earnings per share. In addition, because dividends are paid after enterprises pay income tax, this increases the tax burden of enterprises.

2. Share swap and merger. The financing method of stock exchange merger refers to taking the acquirer's own stock as the payment consideration for the merger and obtaining the equity of the acquired party. According to the different financing methods of stock exchange, it can be divided into capital exchange, treasury exchange and cross exchange between parent company and subsidiary company. The advantage of this financing method is that it can avoid the pressure of short-term outflow of a large amount of cash, reduce the liquidity risk caused by the acquisition, and make the acquisition not limited by the scale of mergers and acquisitions. In addition, the financing methods of stock exchange and merger can get accounting and tax benefits. However, the disadvantages of stock exchange mergers and acquisitions are: strictly restricted by securities laws and regulations, complicated and time-consuming approval procedures.

Mixed financing

Mixed financing refers to the financing mode of both debt financing and equity financing. In practice, the most commonly used mixed financing tools are convertible bonds and warrants.

1, convertible bonds. The characteristic of convertible bonds is that corporate bondholders can convert bonds into shares of the enterprise under certain conditions. In the merger and acquisition of enterprises, the use of convertible bonds to raise funds has the following characteristics: first, the yield of convertible bonds is generally low, so the financing cost of enterprises can be reduced; Secondly, convertible bonds have high flexibility, and enterprises can design convertible bonds with different yields and different conversion prices according to specific conditions; Finally, when convertible bonds are converted into common shares, the principal of the bonds need not be repaid. Therefore, the enterprise is exempted from the debt burden of repaying the holder's principal. However, the issuance of convertible bonds also has the following shortcomings: first, when the bonds expire, if the stock price of the enterprise rises, the bondholders naturally demand that it be converted into shares, which will cause the enterprise to suffer financial losses in disguise; If the share price of an enterprise falls, bondholders will naturally demand the return of the principal, which will not only increase the cash payment pressure of the enterprise, but also seriously affect the refinancing ability of the enterprise. Secondly, after the convertible bonds are converted into shares, the original shareholders' equity will be diluted.

2. Warrants. Warrants are issued by joint stock limited companies, and they can buy a certain number of options for common shares of the company at a specific price within a specific period of time. Warrants are essentially call options for common stocks. Warrants are usually issued together with long-term corporate bonds. The advantage of warrants is that they can prevent the shareholders of the merged enterprise from becoming ordinary shareholders, delay the dilution and release of shares, and postpone the dividend payment after the merger, thus providing the company with an additional equity base. Its disadvantage is that if the warrant holder exercises his rights and the stock price is higher than the price agreed in the warrant, the enterprise will suffer certain financial losses.

Leveraged buyout financing

Leveraged buyout financing means that in the process of enterprise merger and acquisition, the acquirer takes the assets and future profitability of the target enterprise as collateral to raise funds to try to acquire. In fact, this method is debt acquisition. By arranging excess loans through investment banks, M&A enterprises can acquire the target enterprises with only a small amount of funds, borrow foreign debts with the assets of the target enterprises as collateral, and also arrange to issue high-interest bonds with this interest rate through investment banks to repay the excess loans. Among them, bank loans account for about 60% of M&A's funds, high-interest bonds account for about 30%, and M&A enterprises only invest about 10%; The rate of return on net assets in this way is much higher than that of ordinary capital structure, and the stock premium of the acquired party is as high as 40%, enjoying debt exemption and reducing agency costs.

Legal basis:

People's Republic of China (PRC) Securities Law

Article 46 An application for listing securities shall be submitted to the stock exchange, which shall examine and approve it according to law, and both parties shall sign a listing agreement.

The stock exchange arranges the listing and trading of government bonds according to the decision of the department authorized by the State Council.

Article 47 An application for listing securities shall meet the listing conditions stipulated in the listing rules of stock exchanges.

The listing conditions stipulated in the listing rules of a stock exchange shall require the issuer's operating years, financial status, minimum public offering ratio, corporate governance and credit record, etc.