After the chairman of the China Securities Regulatory Commission (CSRC), Wu Qing, announced the upcoming "M&A Six Articles," on the evening of September 24th, the CSRC released the "Opinions on Deepening the Reform of the M&A Restructuring Market of Listed Companies" (also known as the "M&A Six Articles").
It not only clearly supports cross-border M&A, allows the acquisition of unprofitable assets, but also indicates that it will increase regulatory tolerance, improve transaction efficiency, enhance the level of intermediary services, and strengthen supervision.
The "M&A Six Articles" explicitly supports reasonable cross-industry M&A, relaxes the acquisition requirements for unprofitable assets, and supports companies in the "Two Innovations" sector to acquire upstream and downstream assets without having to meet the "hard technology" or "Three Innovations and Four New" requirements, providing more room for the M&A restructuring market.
At the same time, increasing regulatory tolerance and simplifying review procedures will also provide more convenience for M&A restructuring.
Tian Lihui, Dean of the Institute of Financial Development at Nankai University, said that the CSRC's "M&A Six Articles" policy will have a significant stimulating effect on the M&A restructuring market, promoting market activity and corporate transformation and upgrading through specific and effective measures.
At the same time, the introduction of market-oriented mechanisms such as the "reverse linkage" of the lock-up period will also stimulate the enthusiasm of private equity institutions for the M&A restructuring market and optimize the market environment.
The first article of the "M&A Six Articles" clearly supports the transformation and upgrading of listed companies towards new quality productive forces.
This includes actively supporting listed companies to carry out M&A restructuring around strategic emerging industries, future industries, etc., including cross-industry M&A based on transformation and upgrading goals, the acquisition of unprofitable assets that help to strengthen the chain and improve key technical levels, and supporting companies in the "Two Innovations" sector to acquire upstream and downstream assets in the industry chain, guiding more resource elements to gather in the direction of new quality productive forces.
"This time, the active encouragement of industrial M&A, especially the support for reasonable cross-industry M&A, has attracted significant market attention," said a person close to the regulatory authorities.
In fact, strict regulation has always been aimed at blind cross-border situations, and there has always been room for reasonable cross-border M&A in policy, and there is indeed a real demand for cross-border M&A.
At present, the proportion of traditional industries among listed companies is still relatively high, and they also have reasonable transformation needs under the background of industrial transformation and upgrading.
From a regulatory perspective, it is necessary to give these enterprises room for development, support listed companies to lay out cross-industry mergers and reorganizations around strategic emerging industries and future industries, and support resources to gather in new quality fields.
Currently, companies on the Science and Technology Innovation Board can acquire assets of unprofitable enterprises, and other listed companies also have such needs.
Some companies are willing to acquire enterprises that are still in the early stages at a relatively low price from a long-term development perspective; some companies consider from the perspective of industrial chain development, although some enterprises are still losing money, but they have technical or market advantages, and acquisition can meet the needs of obtaining technology and market; there are also companies in the "blue ocean," but they are still in the early stages, and more funds may be invested in the research and development field or used to occupy the market.
It is possible to achieve profitability in the short term, but it is more important to seize opportunities by increasing investment at this stage.
"Regulation needs to open up space for such companies," said the aforementioned regulatory official, but it also needs to be clear that it is allowed to acquire temporarily unprofitable enterprises, but the premise is that it should not affect the overall continuous operating ability of the listed company.
In the M&A restructuring plan, it is necessary to make corresponding arrangements to protect the interests of small and medium investors.
There has always been some controversy and even misunderstanding in the market about whether the upstream and downstream assets acquired by listed companies on the Science and Technology Innovation Board and the Growth Enterprise Market should also meet the IPO positioning requirements of "hard technology" or "Three Innovations and Four New".
"This time it actually clarified that it can be acquired, and it does not need to be in line with the IPO positioning of the two innovation boards," said the aforementioned regulatory official, but it is necessary to consolidate the overall attributes of hard technology and three innovations and four new after the acquisition.
Secondly, the CSRC clearly encourages listed companies to strengthen industrial integration.
The second article of the "M&A Six Articles" proposes that while the capital market supports the development of emerging industries, it will continue to help traditional industries reasonably increase industrial concentration and improve resource allocation efficiency through reorganization.
For the integration needs between listed companies, support will be provided by improving the provisions of the lock-up period and greatly simplifying the review process.
At the same time, through arrangements such as the "reverse linkage" of the lock-up period, private equity investment funds are encouraged to actively participate in M&A restructuring.
On the evening of September 24th, the CSRC also announced the "Decision on the Modification (Draft for Comments)" (hereinafter referred to as the "Regulations"), which made specific arrangements for the "reverse linkage" of private equity funds.
The lock-up period for private equity funds with an investment period of 5 years is shortened from 12 months to 6 months in third-party transactions, and the lock-up period for small and medium shareholders in restructured listings is shortened from 24 months to 12 months.
The third article is to further improve regulatory tolerance.
The CSRC stated that while respecting the rules, it will respect market laws, economic laws, and innovation laws, and further increase tolerance for matters such as reorganization valuation, performance commitments, same-industry competition, and related transactions, to better play the role of the market in optimizing resource allocation.
The fourth article of the "M&A Six Articles" is to improve the transaction efficiency of the reorganization market.
The CSRC stated that it will support listed companies to issue shares and convertible bonds and other payment tools in installments, pay transaction consideration in installments, and support financing in installments according to the transaction arrangement, to improve transaction flexibility and capital use efficiency.
At the same time, a simplified review procedure for reorganization will be established to greatly simplify the review process, shorten the review time limit, and improve reorganization efficiency for listed companies that meet the conditions.
The aforementioned content has also been modified in the "Regulations".
In terms of installment payment, a mechanism for installment payment of reorganization share consideration will be established, and the validity period of the approval document for transactions applying for registration and installment issuance of shares to purchase assets will be extended to 48 months; for same-industry competition and related transactions, the relevant regulations will be adjusted to "same-industry competition that will not lead to new significant adverse effects, and related transactions that seriously affect independence or are obviously unfair."
The review also provides a clear time limit.
For example, a simplified review procedure for reorganization has been established, and it is clear that reorganization transactions applicable to the simplified review procedure do not need to be reviewed by the merger and reorganization committee of the securities exchange, and registration can be completed within 5 working days.
For the absorption and merger between listed companies, a 6-month lock-up period is set for the controlling shareholders of the absorbed party, referring to the short-line trading restrictions, and if it constitutes an acquisition, the lock-up period requirements of the "Administrative Measures for the Acquisition of Listed Companies" will be implemented, and there is no lock-up period for the small and medium shareholders of the absorbed party.
In addition, the "M&A Six Articles" proposes to improve the service level of intermediary institutions and strengthen supervision in accordance with the law.
"The CSRC will guide all parties to the transaction to carry out M&A restructuring activities in a standardized manner, strictly fulfill various legal obligations such as information disclosure, crack down on various illegal and illegal acts, effectively maintain the order of the reorganization market, and effectively protect the legitimate rights and interests of small and medium investors."
The CSRC stated.
On the operational level, it is necessary to respect the market and the law to support the dense introduction of policies, but the regulatory attitude has not changed.
For example, blind cross-border M&A is still strictly regulated, and various illegal acts are still severely cracked down on.
A senior executive of a venture capital institution said to First Financial Daily that the "M&A Six Articles" help to smooth the exit channels, but from the actual operational level, it is still necessary to proceed with caution in cross-industry M&A.
"Compared with cross-industry M&A in the past, even if there are technical differences, the essence is that small and medium-sized enterprises do not have the ability to integrate across industries.
Large traditional enterprises also have risks in cross-industry M&A, but they can integrate enterprises upstream and downstream of the same industrial chain."
He said.
In this regard, he suggested: "Local governments can consider changing the assessment standards, and should not only assess the number of new listed companies, but also assess the quality of existing listed companies, especially by designing a set of effective incentive mechanisms to guide the merger and reorganization between small market value (below 50 billion) listed companies within the same province and the same industrial chain, which is better than direct delisting."
In the view of Wanlian Securities, the M&A of "hard technology" enterprises supported by policy is more active, and the willingness of science and technology innovation companies with R&D advantages and a high probability of technology results landing and transformation to acquire is expected to be further increased.
Under the goal of promoting the development and strengthening of large central state-owned enterprises, they will accelerate M&A restructuring and integrate resources to improve industrial synergy.
From the market level, since May this year, nearly 50 major reorganization cases have been disclosed in the whole market, including many large central state-owned enterprise mergers and acquisitions, as well as securities firms' mergers and acquisitions.
Especially after the release of the "Science and Technology Eight Articles," more than 20 companies on the Science and Technology Innovation Board, including Xinmai Medical, Xinlian Integration, and Sanyou Medical, have successively released industrial M&A plans, and the number has significantly increased compared to the same period last year.
From the perspective of reorganization purposes, this year's major reorganization events of A-share companies are mostly major reorganizations focusing on the main business and aimed at industrial cooperation, including horizontal integration, vertical integration, and strategic cooperation; the value of "shell" resources has significantly decreased.
In terms of industry distribution, advanced manufacturing industries represented by high-end equipment, biomedicine, and new energy industries are more active in mergers and acquisitions.
Against the background of the phased tightening of IPOs and multiple policies encouraging M&A restructuring, investment banks and equity investment institutions have turned their attention to M&A restructuring.
Many PE/VC insiders said that now is the time for IPO and M&A to "walk on two legs," to promote enterprises to go public if they can, and to take the path of mergers and acquisitions if they cannot.
In recent years, the number of PE/VC funds that have realized project exits through mergers and acquisitions has significantly increased, and the mainstream at this stage is related to the vertical or horizontal integration of the industrial chain.
"M&A restructuring support policies continue to be implemented, which has played a significant role in promoting the exit of private equity funds, but there are also difficulties, because mergers and acquisitions are more complex than IPOs, and there are more games between the two companies."
The aforementioned venture capital institution senior executive said.
The "M&A Six Articles" specifically has an article that puts forward requirements for intermediary institutions, and the CSRC will also guide securities companies and other institutions to improve their service capabilities, give full play to the role of transaction matchmaking and professional services, and help listed companies implement high-quality M&A restructuring.Under the new regulatory landscape, we must seize the opportunities in mergers and acquisitions (M&A) and restructuring of listed companies, leverage our professional strengths, and promote the integration of resources, quality improvement, and efficiency enhancement, as well as industrial upgrading through M&A and restructuring, thereby driving the improvement of the quality of listed companies.
Some securities firms and investment bankers told First Financial that they will enhance their industrial M&A capabilities in two ways in the future.
First, they will quickly change the mindset and work habits of the investment banking business team regarding the standardized model of IPO business, and guide investment banking personnel to actively explore M&A and restructuring business through optimizing incentive mechanisms.
Second, they will continue to strengthen the "investment banking + investment + research" business collaboration model, leverage the resource advantages of investment banks, enhance their professional judgment of industries, provide customers with more payment options, and thus improve the matchmaking capabilities of investment banks in M&A and restructuring business.
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