What is M&A Fund?
M&A fund is a fund serving M&A target enterprises, which is derived from venture capital funds and private equity funds. There is a specific investment method, which is to acquire the control right of the target enterprise by acquiring the equity of the target enterprise, and then carry out a certain degree of restructuring and transformation, and then sell it after holding it for a certain period of time.
What are the characteristics of M&A fund?
1. When raising funds, M&A funds are mainly raised privately by a few institutional investors or individuals, and their sales and redemption are conducted by fund managers through private consultations with investors. In addition, the investment method is also a form of private placement, which rarely involves the operation of the open market, and generally does not need to disclose the details of the transaction.
2.M&A funds generally invest in private companies, that is, unlisted companies, and rarely invest in publicly issued companies, and will not involve the obligation of tender offer. At the same time, equity investment is adopted, and debt investment is rarely involved. Therefore, private equity investment institutions enjoy certain voting rights in the decision-making management of invested enterprises, which is mainly reflected in investment tools.
3.M&A funds tend to set up enterprises with a certain scale and stable cash flow, which is obviously different from venture capital funds. Its investment period is longer, generally reaching 3 to 5 years or longer, and it belongs to medium and long-term investment. So liquidity is poor, liquidity is poor. There is no ready-made market for the transferor and buyer of unlisted companies to directly contact the transaction.
4. More limited partnerships are adopted. This form of enterprise organization has good investment management efficiency and avoids the disadvantages of double taxation. At the same time, the investment exit channels are diversified, and M&A funds can be invested through IPO, transaction sale, M&A and management buyback of the target company.
We can discuss why the M&A Fund should be established from two angles. From the perspective of private placement of equity investment institutions, equity listed companies and private placement institutions aim to solve the current problems of financing difficulties and limited channels for capital withdrawal. The main reason for the difficulty in financing is that with the development of the financial industry, the homogenization of funds is serious and the competition between funds is becoming increasingly fierce. Cooperate with listed companies to provide implicit endorsement for investment projects, increase investor confidence and attract more investors. On the one hand, due to the imperfect domestic capital market, strict IPO supervision and complicated procedures, a large number of enterprises are waiting to go public. On the other hand, most M&A funds only pay attention to the scale of fund raising and the number of target enterprises at the beginning, without considering the risk of exiting channels and not fully realizing their own exit channels. In addition, the term of M&A fund is generally 3 to 5 years, and the uncertainty makes the original plan change.
For listed companies, listed companies usually join M&A funds as limited partners, because most of the funds are raised by private equity investment institutions with excellent financing ability, and listed companies only need to pay less funds to reduce the financing pressure. Because private equity investment institutions have excellent professional investment management teams, they can speed up the integrated management of listed companies to target enterprises, thus improving the efficiency of mergers and acquisitions.