The A-share M & a market is gradually stabilizing. According to the latest report “A-share M & a market summary in 2021 and prediction in 2022” released by the securities M & a business department of the Federal Reserve, in 2021, the total transaction amount of major asset acquisitions actively initiated by A-share listed companies was 217147 billion yuan, a year-on-year increase of 15.41%, and the average transaction amount per order was 3.29 billion yuan, a year-on-year increase of 20.65%.
The report points out that the absolute advantage of IPO valuation is no longer, and there is no substantive difference in the valuation between separate IPO and M & A of small market value enterprises. The companies to be listed begin to actively seek M & A, and the spring of A-share M & A is coming.
a-share M & a market gradually stabilized
According to the statistics of the securities M & a business department of the Federal Reserve, taking the first disclosure date as the statistical caliber, there were 116 major asset acquisitions initiated by A-share listed companies in 2021, which was basically equivalent to 117 in 2020. In terms of transaction scale, the total transaction amount of 66 disclosed transactions was 217147 billion yuan, a year-on-year increase of 15.41%; The average amount of each major asset acquisition transaction was 3.29 billion yuan, an increase of 20.65% year-on-year, and also rebounded.
In 2021, the number of major asset acquisitions with a transaction amount of more than 2 billion yuan was 19, a year-on-year decrease of 13.64%, and the decline was significantly convergent; Eight large-scale transactions of more than 10 billion yuan increased by 60% year-on-year, a significant recovery from 2020, mainly due to the increase in large-scale acquisitions for the purpose of state-owned enterprise reform and industrial integration, such as the merger of XCMG Co., Ltd. with Xcmg Construction Machinery Co.Ltd(000425) 387 billion yuan, 60 Jinling Pharmaceutical Company Limited(000919) .1 billion yuan to acquire 100% equity of Hongqiao company, Jiangsu Eastern Shenghong Co.Ltd(000301) 144 billion yuan to acquire 100% equity of sierbang, etc.
It is noteworthy that in 2021, “a eat a” mergers and acquisitions increased significantly. In 2021, 13 new disclosure cases of A-share listed companies acquiring listed companies reached a new high, with 3, 11 and 8 cases respectively from 2018 to 2020. These mergers and acquisitions generally belong to industrial mergers and acquisitions, and the transaction methods are mainly agreement transfer, fixed increase, share exchange, absorption and merger, etc.
At the same time, the backdoor market of A-Shares is weak, and the backdoor market of gem is still “zero success”. Five of the nine listed companies that first disclosed backdoor in 2021 have failed. As of March 15, 2022, the remaining four have been approved by the general meeting of shareholders or feedback from the CSRC, and none has been successfully completed.
ipo valuation advantages gradually converge
The securities M & a business department of the Federal Reserve believes that the absolute advantage of IPO valuation of small and medium-sized market value companies is no longer, and there is no substantive difference between IPO and M & A of small market value enterprises. The companies to be listed begin to actively seek M & A, and the spring of A-share M & A is coming.
The Federal Reserve securities counted all 105 listed companies that were issued and listed in the form of registration system in 2020 and deducted non net profit in the range of 50 million yuan to 150 million yuan in 2020.
Statistics show that of the above 105 listed companies, only one has a market value of less than 3 billion yuan on the first day of listing, accounting for 0.95%; At the end of the listing year, there were 15 companies with a market value of less than 3 billion yuan, accounting for 14.29%; At the end of the second year after listing, 21 companies had a market value of less than 3 billion yuan, accounting for 20%; By March 15, 2022, there were 39 companies with a market value of less than 3 billion yuan, accounting for 37.14%.
Although the change of market value will also be affected by the overall market fluctuation, the Federal Reserve Securities believes that it is not easy for small market value enterprises under the registration system to obtain a significant increase in market value after listing.
“In this case, assuming that the net profit of the target company is 150 million yuan and the price earnings ratio is 20 times, the overall valuation of its M & A can also reach 3 billion yuan. At this time, if the institution does not need to gamble, it can directly profit and exit. For institutional investors, it can not only save three years of time and cost, but also avoid the risk of further decline when the ban is lifted three years later.” The securities M & a business department of the Federal Reserve pointed out.
The securities M & a business department of the Federal Reserve pointed out that for the shareholders of these small and medium-sized companies to be listed, it may be a better choice to actively seek mergers and acquisitions of listed companies with industrial coordination.
At the same time, with the deepening of the registration system, the shell resource value of A-share listed companies gradually decreases, and the share price in the secondary market increasingly reflects its internal asset value and industrial value. The Pb of many small and medium-sized listed companies with core competitiveness is less than 1. Therefore, these listed companies themselves can be used as the M & a target of industry leading enterprises.
For example, in March 2022, Jingdong Logistics made a huge purchase of deppon logistics, focusing on the irreplaceable position of deppon logistics in the transportation of large goods, which has a significant industrial integration effect with Jingdong Logistics.
“Based on the analysis of the above two aspects and the background of the comprehensive promotion of the registration system, we are optimistic that 2022 is expected to be the first year of M & A in China’s capital market, many leading listed companies in subdivided industries are expected to become the beneficiaries of this trend, and the ecological environment of China’s capital market is expected to be further improved and make greater contributions to China’s economic development.” The securities M & a business department of the Federal Reserve said.
it is suggested to relax the restrictions on listed companies
M & a gambling requirements
For promoting the further development of the A-share M & a market, the report suggests relaxing the identification standards of strategic investors.
The report points out that since the CSRC tightened the recognition standards of refinancing war investment of Listed Companies in March 2020, investors who meet the war investment standards are “rare”, and there are only a few cases of successful introduction of strategic investors by listed companies through lock-in issuance.
With the in-depth implementation of the registration system, China’s capital market has a good market pricing function, especially the secondary market share price has a more rational response to major events such as mergers and acquisitions of listed companies and the transfer of controlling shares. Therefore, the space for strategic investors to increase arbitrage through price locking is decreasing day by day.
In this case, we can consider relaxing the identification standard of strategic investors, so that more listed companies can play a complementary and promoting role through the introduction of war investment, so as to improve the quality of listed companies.
“Generally speaking, the purpose of price locking issuance of listed companies is not only to ensure the successful issuance of refinancing, but also often has positive significance in many aspects.” It is pointed out in the securities M & A report of the Federal Reserve.
For example, Fujian Longking Co.Ltd(600388) issued an announcement at the end of February 2022 to introduce Zijin Mining Group Company Limited(601899) as a strategic investor, Fujian Longking Co.Ltd(600388) and Yango Group Co.Ltd(000671) belong to the “sunshine system”. In the crisis of “thunder explosion” of major shareholders, the introduction of Zijin Mining Group Company Limited(601899) as a second shareholder can not only open the company’s imagination space in the field of energy conservation, environmental protection and new energy, but also reduce investors’ concerns about the possible change of controlling shareholders.
At the same time, the report also suggested that the requirements for gambling on M & A and reorganization of listed companies should be relaxed. In the last round of M & a bull market, a large number of listed companies experienced “explosion” after the expiration of three-year performance gambling. The main reason is that the high performance commitment led to the target company not accepting the takeover of the listed company, exacerbated the separation of management between the listed company and the target company, and hindered the industrial integration of the target company, What’s more, when they can’t fulfill their high performance commitments, they have to take risks to choose performance fraud, which has seriously affected the ecology of the securities market.
The report pointed out that after experiencing this round of tragic “thunder explosion” baptism, the market began to deeply reflect that more and more listed companies take how to integrate with the target company after M & A and how to serve the long-term development strategy of listed companies as the starting point, choose a more market-oriented M & A method, no longer force the seller to bet on performance, and can appropriately relax the performance gambling requirements of M & A and reorganization of listed companies, Guide more market-oriented mergers and acquisitions.
