Since the beginning of the year, the A-share M&A market has been active. According to the statistics of straight flush iFinD, as of February 9, 236 listed companies have issued announcements related to mergers and acquisitions during the year, subject to the date of the first announcement.
Many insiders said that the optimization of merger and reorganization policies and confidence in economic recovery are the main reasons for the active market. Under the background of the full implementation of the stock issuance and registration system, this year’s M&A market is expected to be more active, which will play a greater role in improving the efficiency of resource allocation, stimulating the vitality of market players and improving the quality of listed companies.
Market confidence continues to strengthen.
In recent years, China’s M&A market as a whole is improving steadily, and its vitality and influence are increasing day by day. In particular, A-share listed companies have gradually become the "main force" of enterprise M&A, and the role of the main channel of capital market M&A has become increasingly prominent.
Tian Lihui, dean of the Institute of Financial Development of Nankai University, believes that when the securities market is at a low valuation, the stock price of an enterprise may be lower than its intrinsic value. During this period, the low cost of mergers and acquisitions will accelerate the market activity. At the same time, the expectation of economic recovery will often drive the stock market to rise, thus increasing the possibility of mergers and acquisitions. In addition, in the past two years, the market-oriented reform of the basic system of M&A and restructuring has been deepening, which has also attracted more listed companies to enhance their competitiveness through M&A and restructuring.
Chen Li, director of Chuancai Securities Research Institute, said that the promotion of listed companies’ willingness to merge and reorganize mainly comes from the continuous optimization and improvement of policies in recent years. The regulatory authorities have continuously guided small and medium-sized enterprises to connect with the capital market through mergers and acquisitions through various measures, and encouraged listed companies with needs, abilities and willingness to merge and reorganize.
In October 2020, the State Council issued the "Opinions on Further Improving the Quality of Listed Companies", proposing to give full play to the role of the capital market as the main channel for mergers and acquisitions, and encourage listed companies to revitalize their stocks, improve quality and efficiency, and transform and develop; In November last year, the CSRC issued the "Three-year Action Plan for Promoting the Quality Improvement of Listed Companies (2022— 2025) proposes to continuously optimize the capital market financing system, improve the supervision mechanism of mergers and acquisitions, and better promote the integration of industrial chain and supply chain.
With the optimization and adjustment of epidemic prevention and control measures and the continuous implementation of a package of policies and measures to stabilize the economy, China’s economy is expected to rebound. Market analysts believe that economic recovery will enhance enterprises’ good expectations for future development, and increasing confidence will promote more enterprises to accelerate the pace of resource integration.
Help industrial transformation and upgrading
People in the industry generally believe that after the full implementation of the stock issuance and registration system, the effect of survival of the fittest will be accelerated, and the demand for the integration of technical capabilities and development of listed companies will increase accordingly. With the functions of clearing bad assets, eliminating excess capacity and injecting high-quality assets, mergers and acquisitions are expected to become a "booster" for upgrading China’s industrial structure.
From the industries of listed companies that announced the merger and reorganization this year, there are many industries such as communication, electronic equipment, mechanical equipment, medicine and biology. Zhou Maohua, a macro researcher in the financial market department of China Everbright Bank, believes that the valuation of the above industries is at a low level, which is conducive to the implementation of mergers and acquisitions, and the industry has a high degree of prosperity. The market is generally optimistic about its development prospects.
"With the full implementation of the stock issuance registration system, mergers and acquisitions of new economic enterprises will become increasingly active." Wang Xuesong, president of Zhongguancun Dahe M&A Research Institute, believes that listed companies in the new economy are engines of high-quality economic development and practitioners of self-reliance in science and technology, and M&A is an important way for listed companies in the new economy to develop. New economic enterprises can use mergers and acquisitions to acquire core development factors such as new technologies, new products and high-tech talents.
AARON Li, deputy general manager of Shenzhen Stock Exchange, said that in recent years, the characteristics of M&A and restructuring industries and entities have become more distinct, and emerging industries have used restructuring transactions to achieve integration and agglomeration, and their activity has gradually increased.
"With the implementation of the comprehensive registration system, mergers and acquisitions will be more market-oriented and convenient. Marketization means that more enterprises will accelerate their development through mergers and acquisitions under the background of relatively low stock market valuation; Facilitation means that enterprises can carry out mergers and acquisitions more quickly and efficiently. " Tian Lihui said.
Chen Li expects that the market activity of M&A and restructuring will be further enhanced. On the one hand, with the launch of the comprehensive registration system, the pace of listing of enterprises has accelerated, and the supply of high-quality M&A targets is expected to increase, which will promote the market activity of M&A and restructuring; On the other hand, since the beginning of this year, enterprises are expected to improve and their willingness to invest has increased. Under the circumstance of great downward pressure on the economy last year, industry competition intensified, and enterprises made up their shortcomings through mergers and acquisitions to enhance their competitiveness, thus enhancing their market position.
Improve the quality of mergers and acquisitions
At present, China’s economy is in a critical stage of stabilization and recovery, structural adjustment, transformation and upgrading. It is necessary to further play the main channel function of capital market mergers and acquisitions to help high-quality economic development. At the same time, creating an efficient, standardized and market-oriented M&A market is also an inevitable requirement for building a standardized, transparent, open, dynamic and resilient capital market.
AARON Li believes that there may be three major trends in the future A-share M&A market: in the short term, market trends and investment withdrawal demand will further stimulate M&A power. In the medium and long term, the merger and reorganization of listed companies will continue the role of the main channel; In addition, while learning from international experience, the future M&A market will be more suitable for the characteristics of China’s capital market and realize localization, internationalization and marketization.
"Giving full play to the main channel function of the capital market still requires the joint efforts of many participants such as regulatory authorities, listed companies and intermediaries." Zhou Maohua said that for listed companies, mergers and acquisitions should not deviate too much from the main business, and it is necessary to evaluate the project market risks and make decisions according to their actual financial situation, and avoid blind investment and disorderly expansion; For intermediaries, they should take a good look at the role of gatekeepers, be diligent and conscientious, and press the pause button in time for projects that do not meet the requirements and have doubts; For the regulatory authorities, it is necessary to adhere to the direction of marketization and rule of law, and continue to promote and improve the relevant rules of mergers and acquisitions.
Strengthening supervision is still an important guarantee for the long-term healthy development of the M&A market. The CSRC recently reported the handling of cases last year, pointing out that major events such as mergers and acquisitions and changes in actual controllers are still high-incidence areas of insider trading. In this regard, the insiders suggest that the regulatory authorities should pay attention to the compliance review of M&A assets, strictly supervise the "three highs" M&A and "flickering" restructuring, resolutely curb the phenomenon of "shell speculation", and severely crack down on illegal activities such as using M&A and restructuring to occupy funds and transfer interests.
"To improve the quality of mergers and acquisitions, it is always necessary to protect the interests of investors, promote the simplification and optimization of mergers and acquisitions procedures, and promote market mergers and acquisitions with synergistic effects." Tian Lihui said that it is necessary to prevent administrative or performance-based mergers and acquisitions, prevent accounting or profit transfer, and at the same time improve the quality of mergers and acquisitions as soon as possible, so that mergers and acquisitions can truly realize the marketization and specialization of the whole process. (Economic Daily reporter Ma Chunyang)
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