The hottest way for overseas financing and interna

2022-08-16
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Overseas financing and international mergers and Acquisitions: the way for private packaging enterprises to replenish their blood

in the era of planned economy, the packaging industry is an industrial ownership pattern dominated by state-owned enterprises and supplemented by collective enterprises. Since the middle and late 1980s, township enterprises have gradually stepped into this industry through joint ventures with state-owned enterprises. Since the 1990s, the "three capital" enterprises have entered the Chinese mainland market, while private enterprises have developed rapidly. In the 21st century, state-owned enterprises and collective enterprises gradually fade out of the packaging market, and their proportion in the industrial ownership structure has decreased significantly, and continues to decline; The "three capital" enterprises with international advanced market ideas and successful management experience, as well as the dynamic private enterprises with market sensitivity, have become the main body of the industry. However, when the production scale of private enterprises develops to a certain extent, capital often becomes the bottleneck of enterprise development. There are three main sources of enterprise capital: first, the capital accumulated by itself; Second, bank loans; Third, capital and securities markets

as China's capital market has only a dozen years of development, its structure has certain defects, which is not conducive to the financing of private enterprises; Moreover, commercial banks' financing support for private enterprises is limited, and there is too much liquidity, which makes it difficult to form a strong support for enterprises. Various factors make informal finance the main way of financing for private enterprises. However, informal finance in the form of private lending and mutual guarantee itself has great risks, which is not conducive to the long-term development of enterprises. The evolution of economic globalization has greatly promoted the integration of international financial capital. In this context, it has become a general trend for international capital to flow to China and Chinese enterprises to seek financing from overseas capital. At present, the global securities market has begun to step up its search for listing resources in China, and how the private economy, as an important part of China's economy, seizes the opportunity and uses the "blood" of international capital to seek its own better development has become an unavoidable topic

overseas financing - inject vitality into enterprises

compared with domestic financing, the funds of overseas financing are significantly different, mainly reflected in: the amount is large; It is often necessary to integrate a variety of financial instruments; Long service life; There are many professional institutions involved; High requirements for financial transparency of enterprises (or projects); The cost of capital can be controlled. There are many kinds of overseas financing, but basically it can be divided into "equity financing" and "debt financing"

"equity financing" according to the statistics of various cases of cooperation between Chinese and foreign-funded enterprises in China and overseas financial institutions in this financing field, there are mainly the following three situations

1. The business performance of the enterprise in the past few years is good, and the marketing strategy and market positioning of the enterprise are excellent, but it lacks sufficient capital flow to support a project with promising profit prospects. At the same time, the enterprise management also hopes to expand the scale of the company and then list it on the overseas stock market. Under this premise, enterprises introduce overseas strategic/financial investors through private equity placement by increasing capital and shares (that is, issuing new shares rather than selling old shares). After the completion of the private placement stage, the scale of the enterprise has expanded, and overseas strategic investors have been introduced at the same time as a development fund, making the structure and management of the enterprise more in line with international standards, and making important preparations for the next listing of the enterprise in the overseas stock market. Although the equity of the original shareholders of the enterprise has been diluted by a certain proportion, the controlling right (major shareholder) of the enterprise will usually be in the hands of the original shareholders of the enterprise. Judging from the recent development trend of foreign capital's mergers and acquisitions of Chinese domestic enterprises, many foreign acquirers require to hold shares in enterprises after mergers and acquisitions. Therefore, the final result must be determined according to the actual situation of each specific case

2. The business performance, scale, management structure and quality of the enterprise fully meet the listing requirements of the overseas stock market, directly apply for overseas listing (IPO), and integrate the development funds required by the enterprise from the overseas capital market. However, as the relevant policies of relevant departments in China change from time to time, enterprises should pay close attention to the latest policy developments in this regard when the sample breaks

3. Due to the large time, workload, cost, etc. required for enterprises to list overseas, some enterprises tend to adopt the commonly used "reverse take over" (RTO re verse take over, usually also known as shell purchase listing) method in the overseas capital market to achieve the purpose of overseas listing. In contrast, the time, workload and cost of overseas listing through reverse mergers are much less than that of overseas direct listing, which can usually be completed in about six months. However, enterprises cannot immediately integrate funds like direct listing. After listing through reverse mergers, enterprises still need a period of operation process to achieve the purpose of issuing new shares by stages. Therefore, whether to adopt direct listing or reverse acquisition to realize overseas listing must depend on the specific situation of each enterprise and the wishes of the enterprise management. The operation of reverse acquisition is particularly suitable for IT companies. In addition, if reverse takeover is considered for listing, the after tax profit of the enterprise in the previous fiscal year is required to be no less than 20million yuan, and it is better to be a wholly foreign-owned or joint venture enterprise. Domestic enterprises have certain difficulties in operation

the concept of "debt financing" is easier to understand than "equity financing", and the operation process is relatively simple. At present, there are two types of operation

the first form is enterprise loan. That is, on the premise of legal collateral, the enterprise borrows the funds needed to expand the production scale from the bank, and takes the current operating cash flow of the enterprise as the support for "repayment of principal and interest" to the bank (the audited after tax profit of the enterprise in the last financial year should not be less than 30million yuan). At present, some basic conditions and standards for overseas banks' loans to domestic Chinese and foreign-funded enterprises are: the loan amount of the enterprise is more than 5million US dollars, the loan period is usually 3-5 years, and the loan is mainly used for the purchase of fixed assets and working capital; First of all, we should review the basic situation of the enterprise and the audited accounting statements of the past three years. At the same time, we should review the detailed fund use plan of the enterprise and require the enterprise to provide the financial forecast statements for the next three years for evaluation; Even if the enterprise has enough collateral, the good operating cash flow situation of the enterprise will be one of the important factors for loan approval; The borrowing enterprise must be a foreign-funded enterprise legally operating in China. Because foreign-funded banks lend to the enterprise in foreign exchange, it is required that the borrowing enterprise must also repay the principal and interest in foreign exchange. There is no restriction on the place where the enterprise is registered. At the same time, it should be registered and managed with the State Administration of foreign exchange according to the "betting difference" (the difference between the total investment and the registered capital of the enterprise) condition, so as to settle/pay foreign exchange with the RMB income of the enterprise in the future. At the same time, "debt financing" as an auxiliary means, combined with "equity financing", plays a role together

the second form is project loan. In addition to the above corporate loans, some overseas banks/consortiums are also interested in providing "project loans" for some domestic infrastructure projects. The processing method of project loans is different from that of enterprise loans. Usually, it requires that all the procedures of project initiation, approval, project legal person registration, etc. have been completed, the early stage investment of the project has been in place, and some projects have been started, and the future interests of the project are used as the mortgage guarantee of the loan. The overseas syndicate will provide the project loan as the first creditor of the project at the proportion of 50% of the total project investment, The legal person of the project must provide an explanation with legal basis for the use, source and availability of the other 50% of the construction funds. Since the overseas syndicate lends foreign exchange, the future repayment of the project legal person is also required to be foreign exchange. There are two solutions to this link: first, if the project legal person is a foreign-funded enterprise or a joint venture, the "betting difference" method mentioned in the above enterprise loan can be used; Second, if the project legal person is not a foreign/joint venture enterprise to strengthen the basic research and technology accumulation industry, it needs the project legal person to obtain the relevant permission of the State Administration of foreign exchange for the foreign exchange loan of the project in conjunction with the local relevant departments, and in the future, it can settle foreign exchange and repay the loan/interest in RMB under the special account of the project

The interest rates of enterprise loans and project loans above

are usually based on the overseas interbank offered rate (such as LIBOR or HIBOR), and the annual interest rates of loans are obtained according to different risk situations (assessed by overseas banks) plus appropriate points. According to the current situation of overseas financial markets, according to previous cases, the annual interest rate of the three-year HK $80million corporate loan, including the financing intermediary commission, is about 6% - 8%; The loan period of the project loan is usually subject to the priority development year of new materials after the basic completion of the top-level design of made in China 2025, which can be extended as appropriate after the expiration, and the oil cylinder will gradually drop

it should be noted that domestic packaging enterprises must make a lot of preparations for overseas financing, not only for the smooth progress of financing, but also for the rapid development of enterprises with the help of external forces after financing. As the types of funds and financing costs are related to the future of the enterprise, and overseas financing involves many aspects, the decision-makers of the enterprise must do it by themselves before they can grasp the opportunity and timeliness. At the initial stage of enterprise financing, a financing team should be established, professionals (including experts in international financing, law, market and other aspects, and international experience) should be appointed, and full-time planning and implementation of financing schemes (design of financing schemes, including fund use, investment income mode, investment guarantee, etc.) should be organized, and Appraisers (preferably international well-known institutions), accountants, domestic and foreign lawyers, technical/market experts An external consulting team composed of financing consultants who are familiar with overseas capital markets. These personnel need to work in the enterprise for at least half a year to one year before they can understand the operation of the enterprise and really play a role. At the same time, introduce appropriate funds for financial needs. As overseas investment institutions will go to relevant departments for interviews when conducting investment Prudential investigations, the support of government departments is very important. Enterprises should make preparations for obtaining government support in advance, including central/local government approval, foreign exchange quota arrangements, etc

international mergers and acquisitions - leverage for the rapid growth of enterprises

recently, some large-scale investment banks and investment funds abroad, such as Goldman Sachs, Morgan Stanley, Citibank, JP Morgan, American Newbridge capital, and so on, have been carrying out strategic equity mergers and acquisitions for domestic enterprises with development potential and industry characteristics, including state-owned enterprises and private enterprises. As for the industry to which the enterprise belongs, as long as it is not related to the economic security and stability of the country, both the enterprise itself and the local government have adopted a very welcoming and fully supportive attitude. Because the entry of foreign capital can not only bring rare capital resources, management mechanism, capital management experience and other favorable factors for the current share reform of enterprises, but also bring good development prospects for enterprises. Through the analysis of recent M & A cases, foreign capital has the following characteristics and practices when involved in such M & A cases

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