Chinese-style MBO - A Trap Full of Flowers

Author: Lang Xianping
Publisher:
Publish Date: 2006-12-01
Features: Lang Xianping's views on MBO: China has never correctly understood the essence of MBO. It is merely named similarly and shares a resemblance to the U.S. MBO, but they have no common essence. China's MBO is not a panacea for corporate property rights reform. Even in the U.S., it is merely a tool for investment bankers to pursue profit. China's MBO must have strong regulatory oversight; without robust legal supervision, every step of the MBO process could become an opportunity for exploitation. The biggest bottleneck for successful MBO in the U.S. is financing, which relies on its developed bond market and numerous equity investment firms. In contrast, China currently lacks the objective conditions to provide financing for MBO. U.S. MBO pricing involves both valuation and competitor participation, whereas China's use of net asset value as the pricing standard is a misconception in MBO, and there is almost no competitor participation.