| 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:
-
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)
-
Subordinated debt / 夹层融资
- Mezzanine structures gaining market share
- 10-15% coupon typical
- Often includes equity kicker (认股权证)
-
High-yield bonds / 高收益债
- Limited market, mostly offshore
- 7-12% coupon range
- 3-5 year maturity
-
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 investment review)
- 行业准入 (sector-specific approvals)
Tax Considerations
- 资本利得税: not separately levied on individuals
- Corporate: 25% (or 15% for 高新技术企业)
- Withholding tax on dividends to foreign investors: 10% ( treaty relief possible)
- 转让所得税 on asset transfers: 25% corporate or 20% individual
Working Capital Norms
- Chinese companies often have:
- Higher AR days (less efficient collections)
- Higher inventory days (especially manufacturing)
- Higher AP days (supplier financing)
- Net WC often runs 5-15% of revenue for industrials
Debt Market Access
- Investment-grade: 3-5% borrowing cost
- High-yield: 8-15% (offshore bonds)
- Bank loans: LPR + 100-300 bps
- Shadow banking restrictions affect 信托融资 availability
Excel Model Structure
Sheet Architecture
- Sources & Uses — deal structure
- Operating Model — 5-year projections
- Debt Schedule — all tranches with amortization
- Returns Summary — IRR, MOIC, equity bridge
- Sensitivity — entry/exit multiple sensitivity
Key Formulas
// EBITDA
=Gross Profit + D&A - S&M - G&A
// Unlevered FCF
=NOPAT + D&A - CapEx - ΔNWC
// Levered FCF
=Unlevered FCF - Interest - Mandatory Amortization - Dividends
// Debt at end of year
=Beginning Debt + New Draws - Mandatory Amort - Optional Prepayment
// Interest expense
=Average Debt × Interest Rate
// IRR
=IRR(Equity contributions, dividends, exit proceeds)
// MOIC
=Exit Equity Value / Total Equity Invested
Output Checklist
Before delivering:
Reference
This skill extends the base lbo-model skill. For Excel formatting standards, formula conventions, and section checkpoint methodology, refer to:
lbo-model/SKILL.md — base LBO methodologyxlsx-author/SKILL.md — Excel file creation standardsaudit-xls/SKILL.md — model validation and audit procedures
Data Source Mode Switch: Set env var IFIND_DATA_SOURCE_MODE to control data source preference.
ifind-only (strict): Use iFind only, error if unavailableifind-fallback (default): iFind preferred, fallback to AkShareakshare-only: Skip iFind, use AkShare only
