As a typical area of market allocation of resources, mergers and acquisitions play an irreplaceable role in promoting the improvement of the quality of listed companies. With the official release of the relevant systems for the comprehensive registration-based reform in February 2023, the mergers and acquisitions of listed companies have also fully entered the "registration-based era", and the mergers and acquisitions have entered a more market-oriented stage, and the adaptability, inclusiveness and efficiency of the basic system of the capital market have been significantly improved.
A-share M&A and restructuring activities continued to slow down during the year
After the number of major A-share asset restructuring projects in the bull market in 2015 reached a peak (415), with the tightening of China's major asset restructuring supervision, since the second half of 2016, the number of A-share M&A and restructuring projects and the transaction amount have dropped significantly, and after 2019, the number of projects disclosed each year has been less than 200.
In 2023, the number of asset restructurings of listed companies will decline further, and according to wind statistics, a total of 195 mergers and acquisitions and restructuring transactions will occur in A-share listed companies in 2023. From the perspective of listed sectors, there were 78 transactions on the main board of the Shanghai Stock Exchange and 4 transactions on the Science and Technology Innovation Board; 72 transactions occurred on the main board of the Shenzhen Stock Exchange and 38 transactions on the Growth Enterprise Market; There were 3 transactions on the Beijing Stock Exchange.
For the whole year of 2023, the total transaction amount involved in the mergers and acquisitions of A-share listed companies will be about 5,1109.5 billion yuan, from the perspective of the listed sector, the main board of the Shanghai Stock Exchange transaction amount is about 37497.1 billion yuan, and about 5.3 billion on the Science and Technology Innovation Board$4.9 billion; The trading volume on the main board of the Shenzhen Stock Exchange is about 8676.1 billion yuan, GEM about 437 million$8.8 billion; The trading amount of the Beijing Stock Exchange is about 2$2.6 billion.
The downturn in the M&A and restructuring market in 2023 is mainly due to the fact that China's economic recovery is still in its early stages, and although the triple pressures of demand contraction, supply shocks and weakening expectations have been alleviated to some extent, aggregate demand is still insufficient. In terms of the external economic environment, under the influence of factors such as high inflation, debt problems, the Ukraine crisis, and financial risks, the prospects for world economic recovery are facing great uncertainty, and the downside risk of the economy has increased, resulting in an overall downturn in the market. With the gradual recovery of the subsequent economy, the vitality of corporate mergers and acquisitions brought about by the comprehensive registration system is expected to gradually emerge.
2. The thinking of industrial mergers and acquisitions is constantly highlighted
With the deepening of the reform of the registration system, the acquisition of pure "shell" companies has declined, and listed companies with industries have gradually become a better choice for acquisition. In 2023, the number of restructurings for the purpose of "horizontal integration" and "strategic cooperation" will account for the largest proportion, with a total of 117 restructurings, accounting for about 60%, and a total of 2,894 amounts involved9.7 billion yuan, accounting for 5664%。
The number of restructurings for the purpose of "shell listing" is only 9, accounting for 463%, but the amount involved is still large, totaling about 10918.6 billion yuan, accounting for 2136%。3. The transaction structure is more reasonableFrom the perspective of mergers and acquisitions, in 2023, the methods of "issuing shares to purchase assets" and "agreement acquisition" will be the main driving force of restructuring, with 85 and 80 transactions respectively, accounting for 80 respectively. 03%, and the amount involved is calculated as 3,7586.2 billion yuan, 5521.4 billion yuan, accounting for respectively. 80%。At this stage, China's M&A and restructuring issue shares to purchase assets has a relatively high proportion, which can raise supporting funds at the same time, and the pricing method is relatively flexible, reflecting the gradual improvement of the familiarity of capital market participants with the transaction structure and process, and they are more inclined to use these mature, widely accepted and diversified and flexible methods when carrying out M&A and restructuring. At the same time, diversified trading methods such as absorption mergers and asset replacement have also been widely used, and the transaction structure has become more reasonable. 1. China's A-shares have entered a new era of "comprehensive registration system".On February 17, 2023, the China Securities Regulatory Commission (CSRC) issued the relevant system rules for the full implementation of the first-class issuance registration system, and China's A** market officially entered a new era of "comprehensive registration system". The registration system, also known as the issuance registration system, refers to the fact that when the issuer applies for issuance, it will completely and accurately declare all kinds of information disclosed to the issuance review agency in accordance with the law, and the issuance review agency will conduct a formal review of the comprehensiveness, accuracy, authenticity and timeliness of the application documents, without conducting substantive review and value judgment on the issuer's qualifications, and leaving the good and bad of the issuing company to the market to decide. The registration system is the third management system after the approval system and the approval system in China, with information disclosure as the core, the issuance conditions under the approval system are transformed into information disclosure requirements as far as possible, and at the same time further clarify the division of responsibilities between the first exchange and the China Securities Regulatory Commission, the China Securities Regulatory Commission will delegate the review power of listed companies to the Shanghai Stock Exchange, the Shenzhen Stock Exchange, and the Beijing Stock Exchange. For the mergers and acquisitions of A-share companies, according to the requirements of the registration system, the registration system is uniformly implemented for listed companies in all market sectors to issue shares to purchase assets, and the Administrative Measures for the Material Asset Restructuring of Listed Companies (2023 Revision) stipulates the review process for major asset restructuring. Compared with the previous approval system, the Restructuring Review Rules under the registration system stipulate that for eligible restructuring applications, the number of rounds and inquiries can be reduced, the review content can be optimized, and the review efficiency can be improved, and the total review time of the exchange shall not exceed 3 months; The circumstances under which an independent financial adviser voluntarily withdraws the application documents will trigger the termination of the review, etc. At the same time, review mechanisms such as the "lane separation system" and "small amount fast" also divert different types of M&A and restructuring applications, greatly speeding up the approval process. 
In 2023, the average review period for major restructuring projects registered on the Shanghai Stock Exchange and the Shenzhen Stock Exchange will be 141 days, and the average review period for the Shenzhen Stock Exchange will be 132 days, which is about 30%-35% more efficient than the average time of 201 days under the approval system.
2. Policies to promote the facilitation and enrichment of the M&A and restructuring market
In the context of the comprehensive registration system, the relevant rules have improved and revised the identification standards, pricing mechanism, disclosure supervision, and transaction methods of major asset restructurings, which are intended to reduce the cost of mergers and acquisitions of listed companies, and promote listed companies to improve quality and efficiency, and become better and stronger through mergers and acquisitions.
3. After the "827 New Deal", IPOs were tightened, which promoted the development of the M&A and restructuring market
On August 27, 2023, the China Securities Regulatory Commission (CSRC) issued an announcement on the "Regulatory Arrangements for the Coordination and Optimization of IPOs and Refinancing in the Primary and Secondary Markets", which clearly proposes to tighten the pace of IPOs in stages and restrict the refinancing behavior of enterprises that break the issuance, break the net and continue to lose money. This action is known in the market as the "827 New Deal".
In 2023, a total of 695 IPO applications of A-share companies will be accepted by the exchange, of which 593 will be accepted before the "827" new policy, with an average of 74 per month; After the "827 New Deal", the number of applications was 102, an average of 26 per month. It can be seen that after the "827 New Deal", the number of IPO applications accepted by the exchange has decreased significantly.
Normally speaking, the investment income of IPO listing is much greater than that of mergers and acquisitions, and in the context of the comprehensive registration system, enterprises should be more active in seeking IPO listing. However, due to the tightening effect of the "827" New Deal on IPOs, many companies to be listed have turned to seek mergers and acquisitions to achieve their own development goals, and at the same time, the refinancing restrictions on broken, broken and continuous loss-making enterprises may prompt these enterprises to seek to improve their operating conditions and financial conditions through mergers and acquisitions, thereby increasing the activity and trading volume of the mergers and acquisitions market.
Features of market trading.
1. The audit efficiency is gradually improved
As of December 31, 2023, a total of 62 A-share listed companies were in the status of "completed", accounting for 31 of the year79%, up 1117%；The transaction amount is 28801.7 billion yuan, mergers and acquisitions to raise matching funds 6681.6 billion yuan.
From the perspective of the review pass rate, in 2023, the M&A and restructuring market will pass the review of 25 companies by the Exchange's M&A and Reorganization Committee, 1 company will be rejected, 1 company will suspend voting, and 8 applications will be withdrawn during the review period, with a review pass rate of 9615%, an increase of 4 year-on-year15 percentage points. We believe that the increase in the approval rate reflects two changes: first, listed companies pay more attention to the optimization and integration of resources and industrial synergies when carrying out restructuring, and reduce blind restructuring behavior; Second, the strengthening of information disclosure requirements for M&A transactions under the registration system has effectively selected the quality of the underlying assets and improved the overall quality of restructuring transactions.
However, the increase in the audit pass rate does not mean that the audit standards are relaxed, and the audit power delegated to the ** institutions also maintains the same review ideas and standards as the Mergers and Acquisitions and Reorganization Committee of the China Securities Regulatory Commission, and continues to maintain its strict level. The focus on the continued profitability of the underlying assets and the "three highs" (i.e., high valuation, high goodwill and high performance commitment) remained key focuses in the review process. If the withdrawal of the application during the review period is considered (the withdrawal during the project review period and the termination of the application by the listed company after the review is passed), the success rate of the project in 2023 is about 7143%。
2. The completed project is mainly small-value transactions.
From the perspective of the transaction amount range, among the 62 major asset restructuring transactions completed in 2023, a total of 29 transactions with a transaction amount of less than 1 billion yuan ranked first; followed by between 2 billion yuan and 5 billion yuan (including 2 billion yuan), with a total of 14 transactions, ranking second; There were 7 transactions between 1 billion yuan and 2 billion yuan (including 1 billion yuan), ranking third.
Among them, the highest transaction amount was the acquisition of 100% equity of Yunchuan Company by the listed company Yangtze Power, with a transaction amount of 804$8.4 billion; The minimum transaction amount is the acquisition of Beizhan Mining by the listed company Baodi Mining 100% equity, transaction amount of 01.2 billion yuan.
3. The transaction volume of mergers and acquisitions of central state-owned enterprises exceeds 80%, and it is expected to continue to be active
According to the classification statistics of the actual controllers of listed companies, among the 62 listed companies that will complete major asset restructuring in 2023, there are 14 ** state-owned enterprises, 20 local state-owned enterprises and private enterprises and others, accounting for 28 respectively. 26% and 4516%；Judging from the transaction amount, they were 17553.9 billion yuan, 7089 billion yuan, 4158.8 billion yuan, accounting for respectively. 44%。
It can be seen that although the central state-owned enterprises and private enterprises account for half of the number of mergers and acquisitions in the market, the transaction scale of central state-owned enterprises is significantly higher than that of private enterprises, indicating that strategic mergers and acquisitions are an effective way to optimize the layout and structural adjustment of the state-owned economy. 2022 is the end of the three-year action of state-owned enterprise reform, and a new round of state-owned enterprise reform and upgrading action will be launched in 2023, and solidly promote the strategic restructuring and professional integration of state-owned enterprises, which is the focus of the reform of state-owned enterprises of the State-owned Assets Supervision and Administration Commission.
In this context, the "28 effect" of the capital market has intensified, and resources are constantly gathering to market leaders. For small and medium-sized listed companies, especially private listed companies, it is now a critical period to formulate a clear strategy and take positive actions, and should make use of the remaining strength of mergers and acquisitions to break the restrictions on development through mergers and acquisitions. If you choose to be content with the status quo and do not want to forge ahead, you may only become the target of mergers and acquisitions by others in the future, and even face the risk of delisting.
4. The mergers and acquisitions of the manufacturing industry ranked first
According to the first-level industry statistics of the China Securities Regulatory Commission, the 62 listed companies that will complete major asset restructuring in 2023 are distributed in 10 first-level sub-industries. Among them, the C manufacturing industry topped the list with the number of 32 listed companies, followed by the production and ** industry of electricity, heat, gas and water, as well as the production and industry of agriculture, forestry, animal husbandry and fishery, with 6 and 5 listed companies completing the restructuring respectively. Further subdivided into secondary industries, the C26 chemical raw materials and chemical products manufacturing industry and the C39 computer, communication and other electronic equipment manufacturing industry tied for the first place, with 6 listed companies each carrying out major asset restructuring.
Therefore, on the whole, the manufacturing industry is still the main area for listed companies to carry out major asset restructuring. This reflects that the manufacturing industry, as an important pillar of economic development, still has strong vitality and development potential in the current economic environment. The traditional manufacturing industry is facing the pressure of transformation and upgrading, through mergers and acquisitions, enterprises can quickly obtain new technologies, new markets and new resources, so as to enhance competitiveness, the manufacturing industry in the mergers and acquisitions market activity shows that manufacturing enterprises are actively using the tools of the capital market to achieve their own development strategies and goals.
Shanghai Lujiazui Financial Zone Development Co., Ltd. issued shares and paid cash to purchase assets and raise matching funds
(1) Overview of the transaction
On April 17, 2023, Shanghai Lujiazui Financial Development Co., Ltd. (hereinafter referred to as the "listed company") issued the "Report on the Issuance of Shares and Payment of Cash to Purchase Assets and Raise Matching Funds and Related Party Transactions by Shanghai Lujiazui Financial Development Co., Ltd. (Draft)", which intends to purchase 100% of the equity of Changyi Company and 30% of the equity of Dongyuan Company held by Lujiazui Group by issuing shares, and intends to purchase 60% of the equity of Yaolong Company held by Qiantan Investment by paying cash. 100% equity of Qirong Company.
Before the transaction, the listed company has held 30% of the equity of Dongyuan Company, after the completion of the transaction, the listed company holds 100% of the equity of Changyi Company, 60% of the equity of Dongyuan Company, 60% of the equity of Yaolong Company, 100% of the equity of Qirong Company, Changyi Company, Qirong Company will become a wholly-owned subsidiary of the listed company, Dongqi Company, Yaolong Company will become the holding subsidiary of the listed company.
(2) Nature of transaction
1) Constituting a major asset restructuring, the net assets to be purchased in this transaction account for the net assets at the end of the audited consolidated financial accounting report of the listed company in the most recent fiscal yearThe proportion reaches more than 50% and exceeds 50 million yuan.
2) Constituted a connected transaction, Lujiazui Group is the controlling shareholder of the listed company, and Qiantan Investment is a holding subsidiary of Lujiazui Group.
3) does not constitute a reorganization of the listing recentlyWithin 36 months, listed companiesThere has been no change of control, before and after the completion of this transaction, the listed companyThere has been no change in the controlling shareholder and actual controller.
(3) Purpose of the transaction
With commercial real estate as the core of the industry, Lujiazui Group has built a development pattern of "commercial real estate + commercial operation + financial services", and is responsible for the comprehensive urban development and operation of Lujiazui Financial ** District, Qiantan International Business District and other areas. Through this reorganization, Lujiazui Group can inject high-quality assets located in Lujiazui Financial ** District and Qiantan International Business District into listed companies, which is conducive to the listed companies to participate more deeply in the eastward expansion of Lujiazui Financial City and the development, construction and operation of Qiantan International Business District, improve asset quality, optimize financial structure and enhance sustainable development capabilities.
(4) The main questions asked.
1) Consideration of cash payment transaction consideration.
According to the application materials, the transaction consideration of Qiantan Investment was paid in cash of about 657.5 billion yuan, of which 59400 million yuan comes from the funds raised in this matching. Listed companies are required to explain the main considerations for cash payment of transaction consideration, as well as the impact on the company's operation and financial condition if the funds raised fail or are insufficient.
The payment method of "issuing shares to purchase assets + cash" has become the mainstream, and for this method, the audit agency focuses on the reliability of cash funds and the impact on the finances of listed companies. Therefore, if an enterprise chooses this payment method, it should fully consider the feasibility of its own funds (cash, bank deposits, trading financial assets, etc.) and self-raised funds (bank credit balances, etc.) to pay the transaction consideration.
2) On the specific reasons for assessing the added value.
According to the application materials, the valuation of 100% equity of Changyi Company, the target of this transaction, is 186.8 billion yuan, with an appraised value-added rate of 1,11678%, 100% equity valuation of Dongyuan Company is 1625.3 billion yuan, with an appraised value-added rate of 154%, and the valuation of 100% equity of Yaolong Company is 76500 million yuan, with an appraised value-added rate of 12509%。Listed companies are required to disclose the specific composition, book value, and appraised value of inventory investment real estate, and analyze the specific reasons for the appreciation of the main value-added items.
The fairness of the valuation remains the focus of the reviewWhen carrying out the preliminary work of mergers and acquisitions, enterprises should choose third-party institutions such as feasibility research institutions with Class A qualifications, accounting firms and evaluation agencies with first-class qualificationsConduct in-depth market research, select appropriate evaluation methods, determine a reasonable market value, and meet the inquiry requirements of the audit agency.
2. Failed to pass the audit project.
In 2023, one of the major asset restructuring of A-share listed companies that was rejected by the exchange was the acquisition of 100% equity of Tiger Environment by Earth Ocean.
(1) Overview of the transaction
On November 18, 2022, Hangzhou Dadi Marine Environmental Protection Co., Ltd. (hereinafter referred to as "Dadi Ocean") issued the "Hangzhou Dadi Marine Environmental Protection Co., Ltd. issued shares to purchase assets and raise matching funds and related party transaction report (draft) (revised)", which intends to purchase 100% of the shares of Tiger Environment held by Tang Weizhong, Jiuyin Partnership, Zhang Jielai, Tang Yuyang, Lanbei Xingyue, Jin Xiaozheng, Chengtian Venture and Chengzhuo Venture by issuing shares, with a transaction of 91. 000.000,000 yuan. After the completion of the transaction, Earth Ocean will hold 100% of the equity of Tiger Environment. At the same time, it is planned to issue shares to no more than 35 qualified specific targets to raise matching funds, and the total amount of funds raised will not exceed 56,000000000000 yuan, not more than 100% of the transaction of purchasing assets by issuing shares in this transaction**; The number of shares to be issued does not exceed 30% of the total share capital prior to the offering, i.e. 25,200,000 shares.
(2) Nature of transaction
1) It constitutes a major asset restructuring.
2) It constitutes a connected transaction, and the counterparties of this transaction, Tang Weizhong and Zhang Jielai, are the controlling shareholders and actual controllers of the listed company, and Tang Weizhong serves as the chairman of the listed company and is a related natural person of the listed company; Tang Yuyang is the daughter of Tang Weizhong and Zhang Jielai, one of the actual controllers of the listed company, and a natural person associated with the listed company; Jiuyin Partnership is an enterprise controlled by the actual controller of a listed company and is an affiliated enterprise of a listed company.
3) It does not constitute a reorganization and listing.
(3) Main questions to be asked
1) Fairness of asset pricing.
According to the application materials, the underlying assets are valued using the income method, with April 30 and December 31, 2022 as the valuation base dates, and the appreciation rate is 74313% and 50864%。Evaluation** The service contract can be renewed as scheduled after expiration, and the service unit price remains basically stable. However, after verification, there is great uncertainty about whether the service contract can be renewed as scheduled, and during the reporting period, the service ** of the newly signed contracts in Yuhang District of Hangzhou City (including Linping District) and Anji County of Huzhou City decreased significantly compared with the previous period.
As a related party transaction constituting a material asset restructuring, itsHigh premium on the appraised value of the assetIt is the focus of the audit body. The underlying asset is in the coming yearProfit** and related parametersWhether it is reasonable and whether this high-premium acquisition is necessary, will beIt affects the interests of listed companies and small and medium-sized shareholders.
2) Compliance with information disclosure.
According to the application materials, the listed company failed to timely disclose the existence of capital occupation, third-party collection of payments, and on-lending of the underlying assets during the reporting period.
Controlling shareholders, actual controllers and other related partiesThe non-operational occupation of listed companies' funds has always been the top priority of regulatory attentionThe occupation of funds in various forms, whether deliberately caused or non-subjective misoperation, has caused damage to the legitimate rights and interests of listed companies and the majority of investors. Due to the existence of undisclosed matters that should be disclosed, or the failure toTimely, truthful, accurate and completeThe audit agency believes that the listed company has information disclosure compliance issues.
(4) The reason for failing the review
1) Failure to fully disclose the reasonableness of the value of the valuation parameters and profitability of the underlying asset;
With the income method as the evaluation method, the audit agency focuses on itThe scale of market coverage, achievable sales volume, and product pricingand other profitability ** the reasonableness of the basic data. Therefore, when a company adopts the income method for valuation, it isAdequate market research should be conductedYesThe industry barriers, the degree of market competition, the main factors affecting the adjustment of the market situationMeet the requirements of the audit agency for the reasonableness of the evaluation parameters.
2) Failure to timely and completely disclose the capital occupation, third-party collection of payments, on-lending, etc. existing in the reporting period of the underlying assets.
To implement a major asset restructuring of a listed company, all parties concerned must:Disclose or provide information in a timely and fair mannerGuarantee the disclosure or provision of informationTrue, accurate, complete,There shall be no false records, misleading statements or material omissions.
Future outlook and recommendations.
1. Future prospects
On the whole, the A-share M&A and restructuring market in 2023 is diversified and active, with the number of restructuring transactions of traditional listed companies gradually decreasing, and at the same time, the transaction of change of control of listed companies is gradually becoming the dominant mode of M&A and restructuring activities in the A-share capital market.
Under the registration system, the normalization of IPO issuance has broken the scarcity of listing platforms, and observing the trend of mergers and acquisitions in the future A** field, we can foresee two significant and increasingly strengthening directions: first,The M&A and restructuring mindset with shell resources as the core will gradually abdicate to the industry-centric mindsetIt means that more listed companies with industrial background will become the target of mergers and acquisitions; Secondly,The number of mergers and acquisitions between listed companies is expected to increase.
Looking ahead, the A-share M&A and restructuring market is expected to remain active. With the promotion of the registration system and the further opening of the capital market, the M&A and restructuring market will pay more attention to quality and efficiency in the future, accompanied by the strengthening of supervision and the improvement of market ecology. These trends will help promote the healthy development of the capital market and provide a fairer and more efficient M&A environment for enterprises.
2. Suggestions for corporate investment.
(1) Clarify the purpose and value of M&A and reorganization.
Before embarking on an M&A, it is important for companies to clearly define their investment objectives and value, i.e., to understand the motivations and potential benefits of M&A. This requires the company to conduct a comprehensive and in-depth analysis of itself and the target enterprise, including but not limited to: its own strengths and weaknesses, opportunities and challenges, needs and problems; Characteristics and advantages, business results and development potential, risks and challenges of the target enterprise; and the similarities and differences between the two sides, synergies and complementarities, compatibility and the feasibility of long-term cooperation.
(2) Reasonable selection of the target of M&A and reorganization
When implementing M&A and restructuring activities, enterprises should carefully select suitable target enterprises and corresponding M&A methods. This involves a comprehensive and neutral consideration of potential M&A targets, which should include: the candidate's operational and financial performance, growth strategy and growth prospects, industry position and competitiveness; Correlation and synergies between candidates, integration challenges and risks, value growth potential and earnings distribution expectations; and key factors such as the valuation level and closing of the candidate**, payment channels and conditions, transaction structure and specific arrangements.
(3) Pay attention to the quality of information disclosure and avoid compliance risks
After the full registration system, listed companies should be honest and trustworthy, and disclose the information necessary for investors to make value judgments and investment decisions in accordance with the law, including at least the following matters:
1) The compliance of the transaction plan, the necessity of the implementation of the transaction, the reasonableness of the transaction arrangement, the fairness of the transaction, the realizability of performance commitments and compensation, and whether the transaction is conducive to enhancing the ability and independence of the listed company to continue to operate.
2) The business model, industry characteristics, financial status, clarity of equity and asset ownership, compliance of operation, integrity of assets, and business independence of the underlying assets.
3) The potential risks of the transaction and the underlying assets.
In short, M&A and restructuring is a complex and important capital operation, which is not only conducive to the company's resource integration and strategic transformation, but also has many problems and risks. In the process of M&A and restructuring, enterprises need to carefully assess the market environment and reasonably plan their M&A and restructuring strategies to achieve sustainable development. For investors, paying attention to the dynamics of mergers and acquisitions and understanding the logic behind them will be the key to grasping investment opportunities.