Abstract:

 Valuation Adjustment Mechanism (VAM) is one of the valuation mechanisms and risk-control tools, which

is universal in private equity investment. Recently, with the increasing use of VAM, the arguments among its legal

force have attached the public attention. By summarizing the typical cases of VAM and analyzing the force of each

factor, the legislation of VAM is affirmed. In order to control the risks of VAM, both sides should set proper

growth targets. Investors can take repeated game terms, making a small amount of investment first to have a

general understanding of enterprises’ profitability and prospects and then making a decision whether to make the

next round of investment. The investors should sign bi-directional VAM with original shareholders of the target

company for protecting the interests of both sides. And arbitration is a better way to solve the controversy.

Key words: Valuation Adjustment Mechanism (VAM), risk control;capital market

CLC Number: 

• D913.64

• F830.9