Lawyer Yang Zhihui of Henan Yurun Law Firm gave a detailed answer:
M&A; A), also known as merger and acquisition, refers to the means of regrouping one or several companies and is an important form of enterprise assets reorganization. Merger refers to the merger of two or more independent enterprises into one enterprise, usually one dominant company absorbs another company or companies. Acquisition refers to the behavior that a company buys shares or assets of another company with cash, stocks or bonds in order to gain actual control over the company (target company) itself or its assets.
Mergers and acquisitions can be classified according to different standards, and their main types and methods include:
Horizontal mergers and acquisitions refer to mergers and acquisitions between companies that produce or sell the same or similar products. Horizontal mergers and acquisitions are conducive to rapidly expanding market share and forming further concentration of production.
Vertical M&A refers to M&A or vertical cooperation between upstream and downstream enterprises in the industrial chain. The advantages of vertical M&A are not only the basic characteristics of expanding production scale and saving the same cost, but also the close cooperation of all links in the production process, speeding up the production process, shortening the production cycle and saving resources and energy.
Compound M&A refers to the merger of companies that combine horizontal M&A and vertical M&A in the same industry, or the merger of companies in different industries. Compound M&A is the combination of the company's development strategy and diversified business strategy, which is conducive to the diversification of business.
Lawyer Yang Zhihui: Member of the Civil Law Professional Committee of Henan Lawyers Association, researcher of the Drug Crime Research Center of Jinpai Lawyers Network, partner and deputy director of Henan Yurun Law Firm, bachelor of law from Zhengzhou University, master of law from Zhongnan University of Economics and Law. The main areas of concern are contract disputes, criminal defense, real estate disputes, etc.
Lawyer Yang Zhihui added:
Cash purchase refers to the payment method of taking cash as the target company.
Share-for-share acquisition refers to the acquisition company issuing shares directly to shareholders of the target company in exchange for shares or assets of the target company. As a result of the stock exchange acquisition, the acquirer acquired most or all of the shares/assets of the target company, thus becoming the controlling shareholder of the target company, and some of the original shareholders of the target company also became the new shareholders of the acquirer. This method avoids the huge cash pressure required for acquisition, but it is difficult to determine the share exchange ratio, especially when the stock price of listed companies changes instantly. It is a very complicated process to determine the share exchange price and share exchange ratio.
Leveragedbuyout, also known as leveraged buyout or financing buyout, refers to the acquisition of the target company by the acquirer with the assets and future earnings of the target company as collateral for financing or large-scale financing loans in other ways.
Debt-based M&A is a way of debt restructuring for enterprises facing bankruptcy. When the merged enterprise is insolvent, the merged enterprise does not need to use funds, but only bears the debts of the enterprise. According to the relevant policies of the state, with the consent of the creditors, the debts of the merged enterprise can be stopped, and some of them can be written off by the national provision for doubtful debts. At the same time, the debt repayment of the merged enterprise can be postponed for 3 to 5 years.
The acquisition of state-owned shares and legal person shares by agreement is the main way for listed companies in China to acquire. The shares of listed companies in China are divided into state shares, legal person shares and social tradable shares. Generally speaking, state shares and legal person shares account for most of the company's shares and cannot be circulated in the securities market. It is impossible for a purchaser to control a listed company by purchasing social tradable shares. The transferee of state-owned shares and legal person shares can become the controlling shareholder of a listed company by agreement.
M&A is "packaged and listed", that is, through M&A, a group of enterprises are controlled, and these enterprises are reorganized and some of their assets are stripped to form a company with excellent assets to be listed. Through the listed companies to raise funds in the securities market, improve the asset status, expand the scale of operation, and improve competitiveness and profitability.
Backdoor listing refers to the acquisition of listed companies (shell companies), and then raising funds through capital increase and rights issue, and then injecting related businesses and assets of the acquired companies through reverse mergers and acquisitions, and finally acquiring companies to achieve the purpose of indirect listing. In the shell-buying and listing transactions, the acquiring company is not interested in the tangible assets and business development prospects of the target company, but in the capital financing channels of the target company.
Backdoor listing, in order to achieve the purpose of backdoor listing, the controlling shareholder of a listed company injects high-quality assets of itself or affiliated enterprises into the listed company.
What path should each M&A project take? This depends on many practical factors. Because enterprise M&A is a complex and delicate technical work, M&A needs not only careful economic consideration, but also many legal obligations. A successful M&A must be the result of careful decision-making and careful operation with the participation of many professionals.