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Our country state-owned enterprise management buyout (MBO) study of practical problems

Author: LiuJie
Tutor: SongGuoLiang
School: University of Foreign Trade and Economic
Course: Finance
Keywords: Management buyout (MBO) MBO pricing MBO financing
CLC: F279.21
Type: Master's thesis
Year: 2006
Downloads: 362
Quote: 1
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Abstract

Management Buyout evolved in 1970s. It emerged and grew up with the wind ofinnovation of financial markets in European countries, and became a strong stream inthe revolution of organizational structure and corporate governance in the last twentyyears in western countries. As a mature method of Leverage Buy-out in developedmarket, MBO took a huge hope in the quit of state equity and intensify the corporategovernance structure.However, MBO as a new tool in China capital market, have appeared in some SOEsby right of its unique advantage. It becomes an important thesis of the currentreformation of China property right system. It plays a positive role in arousing theenthusiasm of administration and supervision authorities of enterprises, revitalizingthe operation of enterprises and greatly strengthening the kernel competitiveness ofenterprises. But in the same time, there are some questions in MBO such as lack offair pricing and lack of financing instrument, and it may lead to lose of state-ownedassets.There are four parts in this article. The first part is conspectus of MBO. It is mainlyabout the conception, trait, development and basic theories of MBO. The authorintroduced four theories of MBO. The first one is wealth transfer theory. This theorythought that MBO do not bring virtual change to the company. The betterperformance just shows the wealth transfer from other people to the management. Thesecond one is the agency cost theory. This theory thought because the utility of thestockholders and the managers is different, there will be the trust cost. Using the freecash flow at will is the agency cost’s mainly represent. So, through MBO, improvethe leverage of the company and restrict the using of free cash flow, the managers arethe active investor. The performance of MBO comes from the thrift of agency cost.The third one is recovery theory. This theory thought that the investment frommanagers to company could be easily deprived by other people, such as shareholders.So the managers have reason to operate MBO. The last one is the entrepreneur spirittheory. This theory thought that the entrepreneur spirit is important to a company. Itcan combine the outer and inter resource, then the strategy transfer come true.The second part is mainly about demonstration analysis of our country’s MBO. It isincludes the performance of our SOEs’ MBO and the case of Zhangyu MBO. In thepart of analysis of performance, the author chose 13 company which operate MBO,and chose 13 company which do not operate MBO. The comparison of this two gropecan show the MBO play a active role in the improve the performance of the company.In the part of the case of Zhangyu, the author introduced the process detailed, andmade a judgment about it.The third part discusses questions about the MBO in our country. The main questionsare the pricing and financing. Aiming at the pricing, the author advised we shouldperfect the pricing mechanism. And about the financing, the author advised we shouldperfect the financing channel as soon as possible.Lastly, the author made a judgement of the resent station, and expected the successfulway of our country’s MBO.

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CLC: > Economic > Economic planning and management > Enterprise economy > Companies around the world economy > China > Business organizations and institutions
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