M&A financing risk refers to the risks related to M&A funds and capital structure, including whether the financing method is consistent with the M&A motive, whether it will affect the control of the M&A enterprise, whether the funds can be received immediately, whether the amount of funds can meet the demand, and whether the debt burden will have a negative impact on the production and operation activities of the enterprise.

Because the amount of capital required for mergers and acquisitions is relatively large, whether or not sufficient funds can be raised in a timely manner becomes the key to the success or failure of mergers and acquisitions.

As mentioned above, financing can be divided into three types: equity financing, debt financing and hybrid financing, each type of financing has different risks.

◆ Internal Financing RiskInternal financing can raise the required funds in the shortest possible time and at the lowest possible cost.

If only cost is considered, in-house financing should be the preferred financing method for M&A financing. However, internal financing has great limitations, which are mainly manifested in the following three aspects: first, corporate mergers and acquisitions require a large amount of capital, and it is difficult to meet the capital needs by internal financing alone; Second, the internal funds of the enterprise are often used to make up for losses, make R&D investment, etc., and if a large amount of them are occupied due to mergers and acquisitions, it may have a negative impact on the normal business activities of the enterprise; Third, if a large amount of internal funds are occupied, especially internal liquidity, it will lead to a decrease in the ability of enterprises to adapt to the external environment.

As a result, companies generally do not use internal financing as the primary method of M&A financing. ◆ Stock financing venture enterprises can issue ordinary shares through additional issuance, allotment and other ways to raise funds for mergers and acquisitions, because stock financing does not require enterprises to pay fixed interest, and there is no maturity date for the use of funds, so the risk is small, is a financing method favored by enterprises.

However, stock financing also has risks, which are mainly manifested in four aspects: first, shareholders of ordinary shares enjoy voting rights, and the issuance of too many ordinary shares by enterprises will lead to the dispersion of corporate control, and if the calculation is wrong, the enterprise may face the risk of reverse takeover; Second, the cost of equity capital is high, and common equity financing is not conducive to the formation of a reasonable capital structure of enterprises; Third, the issuance of ordinary shares by enterprises must be subject to the approval of relevant departments, and the approval period is long, which may cause enterprises to miss M&A opportunities; Fourth, common equity financing is not tax deductible.

Corporate Finance: Equity Financing× Debt Financing× IPO Listing × M&A Financing) 5.4.1 Equity Financing Risks are in hand, please wait a moment,

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