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Tuchong Creative/Photos provided by Hu Feijun/Table creation by Zhai Chao/Graphics

Securities Times reporter Sun Xiangfeng and Hu Feijun

With the implementation of the "Eight Measures for the Science and Technology Innovation Board", a number of companies on the Science and Technology Innovation Board have recently disclosed their plans for mergers and acquisitions and restructuring. Driven by both policy support and industry demand, the mergers and acquisitions and restructuring business of the Science and Technology Innovation Board is expected to become a new business growth for securities companies.

"The new policy is undoubtedly a starting gun for investment banks," a person from Sino-German Securities said in an interview with a Securities Times reporter, "and it is expected that in the future medium-term window, the capital market may usher in several rounds of corporate mergers and acquisitions."

The window for mergers and acquisitions and restructuring has opened

The "Eight Measures for the Science and Technology Innovation Board" focus a lot on mergers and acquisitions. For example, they support the Science and Technology Innovation Board listed companies to carry out mergers and acquisitions of upstream and downstream of the industrial chain to enhance the synergy of the industry; they support the Science and Technology Innovation Board listed companies to focus on improving and strengthening their main business and carry out absorption mergers; and they encourage securities companies to actively carry out mergers and acquisitions and enhance their professional service capabilities. This series of new policies has boosted the confidence of all parties in the market.

"In the past few years, Sino-German Securities has made preparations for related projects and is capable of facilitating more M&A transactions around the M&A and restructuring needs of companies listed on the Science and Technology Innovation Board," said the head of Sino-German Securities' investment banking business.

In fact, the introduction of the M&A and restructuring policies in the "Eight Measures for the Science and Technology Innovation Board" is timely. The industries in which some companies on the Science and Technology Innovation Board are located are undergoing rapid changes, and companies need to integrate resources and optimize the layout of the industrial chain through M&A and restructuring to maintain their competitive advantages.

Liao Weiping, assistant to the president of Guojin Securities and general manager of Guojin Securities Shanghai Securities Underwriting and Sponsoring Branch, told the Securities Times reporter that with the continuous development of the Science and Technology Innovation Board market, more and more companies are aware of the importance of mergers and acquisitions. In order to accelerate technological breakthroughs, optimize resource allocation, and enable technological innovation, many companies on the Science and Technology Innovation Board choose to achieve their own rapid development through mergers and acquisitions. At the same time, with the changes in the market environment, some high-quality merger targets have gradually surfaced, providing more opportunities for mergers and acquisitions for companies on the Science and Technology Innovation Board.

"Some companies listed on the Science and Technology Innovation Board realized during their development that purely endogenous growth can no longer meet market demand, so they sought ways of external growth. Through mergers and acquisitions and restructuring, companies can quickly acquire new technologies, new talents, new markets and new channels, thereby accelerating their own development. At the same time, mergers and acquisitions and restructuring can also help companies achieve industrial chain integration and synergy, and improve overall competitiveness," said Liao Weiping.

Ma Yao, executive committee member of CITIC Securities and director of the Global Investment Banking Management Committee, also said that companies on the Science and Technology Innovation Board are facing urgent needs such as technology upgrading, market expansion and industrial chain integration. Faced with the complex market environment in recent years, some companies can quickly acquire key technologies, market share and talent resources through mergers and acquisitions and restructuring to achieve external growth. This type of development needs to become an important factor in promoting mergers and acquisitions and restructuring of companies on the Science and Technology Innovation Board.

It is worth noting that promoting mergers and acquisitions and restructuring among companies listed on the Science and Technology Innovation Board will also help ease pressure on the primary market and promote a virtuous cycle of venture capital funds.

Wang Xuechun, vice president of Minsheng Securities and president of the investment banking division, told the Securities Times that the past decade has seen a leap forward in equity investment in China's primary market, and that the vast majority of companies that have applied for or have been listed on the Science and Technology Innovation Board currently have external investors as shareholders. With the cooling of primary market investment and the adjustment of IPO policies, the pressure on external investors and shareholders to exit has increased dramatically, which will inevitably prompt many companies to choose mergers and acquisitions as a path for investors to exit.

"It is expected that in the next few years, there will be a large number of mergers and acquisitions of non-listed companies by listed companies, and even mergers and acquisitions of listed companies by listed companies," said Wang Xuechun.

Listed companies seize opportunities

Since the beginning of this year, there have been relatively obvious changes in the field of mergers and acquisitions. Wind data shows that in the first half of this year, 140 listed companies updated and disclosed major restructuring announcements, far exceeding the same period last year. Mergers and acquisitions in advanced manufacturing industries represented by high-end equipment, biomedicine, new energy and other industries are relatively active.

Some companies listed on the Science and Technology Innovation Board have already taken advantage of the policy to embark on the road of mergers and acquisitions.

On July 16, the China Securities Regulatory Commission approved the issuance of shares by Precision Electronics to purchase 67.74% of the equity of Naisu Electronics. After the transaction, Precision Electronics will have a 100% controlling stake in Naisu Electronics. This transaction is the first M&A registration after the launch of the "Eight Measures for the Science and Technology Innovation Board", and it is also the first M&A registration on the Science and Technology Innovation Board this year.

Since June 21, six Sci-Tech Innovation Board-listed companies, including Xinlian Integration, Nanochip, Edi Pharmaceuticals, Fuchuang Precision, Xidi Microelectronics, and Zejing Pharmaceutical, have successively released merger and reorganization plans.

The market's positive response to science and technology enterprises has long been expected. A relevant person in charge of Huatai United Securities told a reporter from Securities Times that as the support policies for mergers and acquisitions and restructuring are gradually transmitted to the market, the willingness for restructuring transactions will gradually increase. The merger and acquisition restructuring market is expected to start an upward cycle, and industrial mergers and acquisitions will become the mainstream of the restructuring market. With the support of reform measures such as the "Eight Measures for the Science and Technology Innovation Board", "hard technology" mergers and acquisitions will also continue to heat up.

"Improving the valuation inclusiveness of mergers and acquisitions of STAR Market-listed companies, enriching payment tools, and conducting research on installment payments of share consideration have provided practical support for mergers and acquisitions of STAR Market-listed companies, and the enthusiasm for mergers and acquisitions is expected to increase in the future." A relevant person in charge of Industrial Securities told a Securities Times reporter.

The above-mentioned person in charge of Sino-German Securities also said that most of the companies listed on the Science and Technology Innovation Board have strong intentions and enthusiasm for mergers and acquisitions, but are constrained by the original regulatory ideas and systems, and the M&A activity is relatively insufficient. With the further opening of ideas and the further improvement of the system, companies on the Science and Technology Innovation Board will definitely be an important part of the M&A market.

Securities firms actively build business advantages

Driven by both policy encouragement and market demand, M&A and restructuring business is expected to grow, and securities investment banks are also eyeing the business opportunities therein.

Supporting Sci-Tech Innovation Board listed companies to carry out mergers and acquisitions of upstream and downstream industrial chains and enhance industrial synergy requires investment banks to play a good service role and organize mergers and acquisitions for listed companies around industrial integration, which puts forward higher requirements for the practice quality and service level of investment banks. Therefore, deepening the industrial chain has become the first choice for securities companies.

Ma Yao introduced that CITIC Securities Investment Bank actively promoted the implementation of the policy requirements for mergers and acquisitions of "hard technology" companies, focused on strategic emerging industries such as advanced manufacturing, worked hard to explore the merger and acquisition needs of science and technology innovation companies, and actively matched and explored innovative merger and acquisition transactions.

At the same time, CITIC Securities continues to strengthen research on related technology industries, systematically sorts out customer needs from top to bottom, provides services around the M&A needs of leading companies in the industry, deepens the synergy between investment banking and investment businesses, and allocates more financial resources to the key directions of technological self-reliance and the development of new quality productivity.

A relevant person in charge of Soochow Securities also introduced that the company has closely followed the policy guidance and accumulated a number of excellent core customers of listed companies. At the same time, it has adhered to the principle of "grasping early and investing in small scale" and cultivated a number of high-quality project reserve resources.

Some securities firms are also actively exploring their own differentiated competitive capabilities and creating market opportunities by relying on their business advantages in geography, research, and other areas.

"Group synergy is an important business feature of Industrial Securities. The investment bank develops new quality productivity in accordance with local conditions. In order to do a good job in the mergers and acquisitions of technology companies, the investment bank has established an M&A resource library. Based on the needs of the acquirer and the target party, and under the premise of compliance, it fully matches the needs and provides services." The aforementioned business manager of Industrial Securities said.

GF Securities also introduced that it will integrate internal resources, led by a professional M&A team, and leverage its own advantages to provide investment banking services to listed companies, especially those listed on the Science and Technology Innovation Board.