Mergers and acquisitions in the Chinese capital market are gaining momentum

This panoramic aerial photo taken on January 10, 2023 shows a view of the Lujiazui area of ​​the China (Shanghai) Pilot Free Trade Zone in Shanghai, eastern China. (Photo/Xinhua)

Mergers and acquisitions (M&A) among Chinese listed companies have gained momentum in recent months thanks to favorable policies to consolidate companies’ competitiveness, contributing to the high-quality development of the country’s capital market.

The number of this type of mergers and acquisitions has increased significantly compared to the same period last year – according to information made public by companies listed on the A-share market, between May and mid-September, 46 large asset reorganization transactions were disclosed.

“So far this year, mergers and acquisitions have been particularly active among technology companies, state-owned enterprises (SOEs) and securities companies, with market forces playing a greater role in deals,” said Tian Lihui, director of the University’s Institute of Finance and Development Nankai.

A telling example is the acquisition of APT Medical, a manufacturer and supplier listed on the Science and Technology Innovation Board (STAR) market, by Mindray, an industry leader in the development and production of medical equipment.

The transaction was announced in January and finalized in April. Combining APT Medical’s strengths in electrophysiology and vascular interventional medical devices with Mindray’s research and development capabilities and overseas marketing experience, the transaction improved the competitiveness of both companies.

Half-yearly financial reports show that the net profits of Mindray and APT Medical increased by 17.37%, respectively, in the first half of this year. and 33.09 percent

In June, the China Securities Regulatory Commission (CSRC) announced a series of measures to further reform the STAR market and pledged to increase efforts to promote mergers and acquisitions among listed companies.

The CSRC said it would support the integration of industrial chains between companies and make M&A institutions more inclusive by supporting companies to acquire high-quality technology companies that have not yet turned a profit.

Thanks to such activities, the value of mergers and acquisitions of companies on the STAR market exceeded 3 billion yuan (approximately USD 427.34 million) in the first half of the year, twice the value from the same period of the previous year, data from the Shanghai Stock Exchange showed.

Technology companies can accelerate innovation and industrial modernization through mergers and acquisitions, Tian said.

Moreover, state-owned enterprises at both central and local levels are also using mergers and acquisitions to stimulate industrial specialization and integration, increasing industrial synergy with business partners.

In September, two publicly traded subsidiaries of China State Shipbuilding Corporation announced a merger plan in what is expected to be one of the largest A-share M&A deals by market value in recent years.

The merger is expected to provide the new entity with a leading global position in shipbuilding, characterized by comprehensive research and innovation capabilities as well as rich product mix and production lines, according to a research note by Huatai Securities.

Securities industry companies have also recorded large mergers and acquisitions this year, with Guotai Junan Securities and Haitong Securities planning to merge through a share exchange.

In recent years, the CSRC has continuously promoted market-oriented reforms in mergers and acquisitions of listed companies. This was achieved through a number of measures, including streamlining approval procedures and optimizing regulatory requirements.

This year, the activities were intensified. In the context of global industrial transformation and the accelerated modernization of China’s economic structure, it is “urgent” for enterprises to leverage the key role of mergers and acquisitions in promoting industrial integration as well as improving industrial quality and efficiency, CSRC Chairman Wu Qing said at a press conference on Tuesday.

On the same day, the CSRC introduced new measures to support China’s listed companies in pursuing M&A activities, promising to help channel more resources into new-quality production forces, encourage companies to strengthen industrial consolidation and enhance investment value by improving value management market .

Tian predicted that the regulator’s latest policy will further boost China’s M&A market and stimulate the transformation and upgrading of listed companies.

“The trend of mergers and acquisitions is expected to continue and play an important role in enhancing the competitiveness of enterprises, especially in areas related to state-owned enterprise reform, scientific and technological innovation and financial services integration,” he said.