There are more and more cases in which investors and investee companies have signed VAM agreements, usually if the company can complete the required business performance within a certain period of time, the investor will return a certain amount of equity to the company at the agreed price, and if the task is not completed, it will need to provide more equity to the investor, and the management team may also be swept away.

For example, the VAM agreement signed between XCMG and Carlyle required XCMG to meet the profit requirement in 2006, and Carlyle invested US$120 million to acquire XCMG's assets of 242 million yuan, otherwise it invested US$60 million to acquire XCMG's assets of 242 million yuan.

For another example, the VAM agreement signed between Jiangsu Yurun Food and Goldman Sachs requires that if the net profit of Jiangsu Yurun Food in 2005 is 263~325 million yuan, it will transfer up to 2.8% of the issued shares to foreign capital; If the net profit is less than 259.2 million yuan, it will be necessary to purchase the equity held by the foreign party at a premium of 20%.

Proper use of VAM agreements can enable investors to effectively control investment risks and motivate the management of the financier to work enthusiastically, but the high risk of VAM itself may also bring greater risks to investors and financiers. Specifically, there are three main types of risks associated with VAM.

◆ The risk of imbalance in the exercise criteria of VAM agreements

In order to control the investment risk to the greatest extent, the investor may put forward higher conditions for exercising the option, while the management of the financier enterprise may, in order to obtain financial support and be in a weak position, enter into a VAM agreement with the investor on the basis of a lack of objective analysis of its actual situation and future development, resulting in an imbalance in the criteria for exercising the VAM. In this case, the management of the financier enterprise gives up on itself because of the excessively high exercise conditions, lacks work enthusiasm, and it is difficult to promote the sustainable and stable development of the enterprise, and the investor cannot maximize the investment benefits, which is a lose-lose situation.

◆ Risk of abuse of VAM agreements

The investor overestimated the binding effect of the VAM on the financier, believing that after the VAM was signed, it locked in risks and guaranteed returns, thus blindly making investment decisions and conducting superficial due diligence, which increased the investment risk to a large extent.

◆ Risks of short-term behavior of investors and financiers

After the VAM is signed, the management of the financier enterprise has to bear a certain amount of operating pressure, and in order to be able to reach the requirements of the agreement, it may take short-term actions such as irrational expansion, and may even falsify financial data, operate in violation of laws and regulations, etc., resulting in an existential crisis for the enterprise. In order to obtain short-term financial returns, investors may also sell stocks through the secondary market without communicating with the financing party, resulting in a decline in the company's stock price and affecting the long-term stable development of the company.