/china-lbo-model

name: china-lbo-model
description: Leveraged buyout model for A-share and China-market LBO scenarios. Adapts the standard LBO-model methodology for Chinese debt markets, CAS accounting, and AkShare data. Use instead of the original lbo-model skill when analyzing leveraged buyouts involving Chinese targets or China-based sponsors.

china-lbo-model

Purpose

Build institutional-quality LBO models for transactions in the China market, accounting for:

• Chinese debt market structures (bank loans, 公司债, 中期票据)
• CAS accounting standards
• A-share trading restrictions and considerations
• China-specific tax treatment

Key Differences from US LBO Models

| Parameter | US LBO | China LBO | |-----------|--------|-----------| | Debt market | Public bonds, institutional loans | Bank syndicated loans, 公司债, ABS | | Typical leverage | 5-7x EBITDA | 3-5x EBITDA (bank-driven) | | High-yield market | Developed | Limited (mostly onshore/offshore 高收益债) | | Covenant package | Bond covenants, bank covenants | Primarily bank-led covenants | | Management roll | Standard | Often 管理层持股 + earn-out | | Tax rate | 21% federal | 25% standard (高新技术企业 15%) | | Currency | USD | CNY (人民币) | | Accounting | US GAAP / IFRS | CAS (企业会计准则) |

Data Sources

Primary: iFind MCP (Tier-1 付费) / AkShare MCP (Tier-2 免费备选)

get_financials(ticker, "income", "annual")   → 利润表 (EBIT, Net Income)
get_financials(ticker, "balance", "annual")  → 资产负债表 (Debt, Cash)
get_financials(ticker, "cashflow", "annual") → 现金流量表 (FCF, CapEx)
get_quote(ticker)                            → Current valuation
get_historical_data(ticker)                  → Trading history
get_stock_info(ticker)                       → Company profile

Secondary Sources

• 巨潮资讯 — public filings for historicals
• 公司公告 — debt agreements, covenant packages
• 银行间市场交易商协会 — bond issuance data
• Wind / 同花顺 — comparable transaction multiples

Workflow

Step 1: Company & Transaction Setup

**Transaction Structure (China-specific):**

• **Buyer type**: 战略投资者 (strategic) vs 财务投资者 (financial sponsor)
• ** Listed status**: A-share delisting process vs 借壳上市 (reverse merger)
• **Deal structure**: 股权收购 vs 资产收购 vs 吸收合并
• **Lock-up**: 限售期 considerations (typically 12-36 months)

**Entry Valuation:**

• Current market cap (流通市值 or 总市值)
• Control premium benchmark: 20-40% typical for China M&A (vs 20-30% US)
• Take-private premium for A-share delistings: 30-50%

Step 2: Sources & Uses

**Sources:**

• Senior debt (银行借款): 40-60% of total consideration
• Subordinated debt / 夹层融资: 5-15%
• Equity ( sponsor equity ): 30-50%
• Revolver (循环额度): 10-20% of EBITDA
• Seller note / 卖方分期付款: common in China

**Uses:**

• Purchase equity
• Refinance existing debt
• Transaction fees (typically higher in China: 2-4%)
• 印花税 (stamp tax): 0.05% on equity transfer
• 增值税 on asset deals: 6% (一般纳税人) or 3% (小规模纳税人)

**China-specific cost items:**

• 印花税 (Stamp tax): 0.05% of deal value for equity transfers
• 契税 (Deed tax): 3-5% for asset acquisitions
• 土地增值税 (Land appreciation tax): for real estate assets
• 中介费用 (Advisory fees): typically 1.5-3% for IB, legal, accounting

Step 3: Operating Model

Build 5-year projections following standard LBO methodology:

**Revenue assumptions:**

• Historical growth rate baseline
• Synergy adjustments (cost savings, revenue uplift)
• China-specific factors:
• 产能利用率 (capacity utilization) trends
• 新产能投放 (new capacity ramp)
• 市场份额变化 (market share dynamics)

**Margin assumptions:**

• Gross margin: track 毛利率
• Operating margin: 营业利润率
• Note: Chinese industrial companies often have thinner margins than Western peers

**Working capital:**

• 应收账款 (AR) days — often elevated in China
• 存货 (Inventory) days — FIFO only (no LIFO under CAS)
• 应付账款 (AP) days
• Net working capital as % of revenue change

**CapEx:**

• 资本支出 intensity (Chinese industrials often capex-heavy)
• Maintenance vs growth CapEx split

Step 4: Debt Schedule

**China-specific debt structures:**

1. **Senior secured bank loan (银行借款)**

• Typically 3-5 year tenor
• SOFR/LPR + spread (1-3%)
• Covenants: 资产负债率, 利息覆盖倍数, 流动比率
• Amortization: typically 1-3% per year (bullet maturity)

2. **Subordinated debt / 夹层融资**

• Mezzanine structures gaining market share
• 10-15% coupon typical
• Often includes equity kicker (认股权证)

3. **High-yield bonds / 高收益债**

• Limited market, mostly offshore
• 7-12% coupon range
• 3-5 year maturity

4. **Revolver (循环贷款)**

• Based on 应收账款 or 存货 collateral
• LTV: 50-70% of eligible collateral

**Interest calculation:**

• Average debt balance method or daily balance
• LIBOR/SOFR replaced with LPR for onshore RMB loans
• Add credit spread based on company rating

Step 5: Returns Analysis

**IRR calculation** (same methodology as US LBO):

• Sponsor equity contributions
• Dividend recapitalizations
• Exit proceeds

**MOIC calculation**:

• Total cash returned / Total cash invested

**Exit multiples:**

• Comparable to china-comps analysis
• Typical EV/EBITDA exit: 6-12x for China industrials
• IPO exit: increasingly common (A-share IPO for delisted targets)

**Sensitivity tables:**

• Entry multiple vs exit multiple
• EBITDA growth vs leverage level
• IRR vs MOIC matrix

Step 6: Scenario Analysis

**Bear case:**

• Revenue growth below plan
• Margin compression
• Higher borrowing costs
• Covenant tightness

**Base case:**

• Plan assumptions achieved
• Standard amortization schedule
• Target exit in year 4-5

**Bull case:**

• Revenue synergies materialize
• Margin expansion through 规模效应
• Lower financing costs
• IPO exit at premium

China-Specific Considerations

A-Share Delisting / 私有化

• 全面要约收购 (General offer) required for >30% stake
• Minimum offer price: typically 6 months highest trading price
• Post-delisting: 3 years before re-listing (创业板/科创板: 2 years)
• 回购价格 must meet regulatory minimums

Regulatory Approvals

• 反垄断审查 (SAMR merger control)
• 经营者集中申报 for deals above thresholds
• 外资安全审查 (foreign investme