The complete registration system will reduce the price difference between the initial public offering and mergers and acquisitions

Currently, there is a relatively large price difference between the initial public offering and mergers and acquisitions, but Peng Qinwen believes that the price difference between the primary and secondary markets will not exist forever. From a dynamic development perspective, the registry system has accelerated the speed of corporate IPOs, and the increase in IPO offering may lower the overall valuation of IPOs in the future.

Recently, the chairman of the China Securities Regulatory Commission, Yi Huiman, stated at the 2021 meeting of the China High-Level Development Forum that the reform of the registry system is a “bull’s-nose” project for China. round of comprehensive deepening of the capital. market reform. From the start of the pilot registration system in the Scientific and Technological Innovation Board, to the implementation of the reform “actions + incremental” in the Growth Companies Market, progress has been made in the reform of the registration system.

Listed companies are the main force and vanguard of the high-quality development of my country’s economy, as well as the cornerstone of sustainable capital market development. In the context of a comprehensive registration system, what are the opportunities for mergers and acquisitions of publicly traded companies? How do you find high-quality M&A targets?

Image source: Tuworm Creative

On March 19, at the Guangzhou Show for Listed Companies in the “M&A Influence Times China Tour” organized by Times Media Group, Peng Qinwen, Chairman of Shenzhen New Finance Network Technology Co., Ltd., told Times Finance that the registration system has accelerated the speed of corporate IPOs In the future, the price gap between IPOs and mergers and acquisitions is expected to narrow, and mergers and acquisitions are expected to lead to new opportunities .

The complete registration system will reduce the price gap between the initial public offering and mergers and acquisitions

After the implementation of the A-share registration system, small and medium-sized enterprises have more opportunities to go public. Choosing high-quality assets to go public over mergers and acquisitions has become one of the reasons for the scarcity of high-quality stocks. quality assets. In this context, the rate of mergers and acquisitions and reorganizations last year was less than 80%, which was significantly lower than the previous two years.

However, Peng Qinwen said in an interview with Times Finance that the traditional definition of high-quality assets is that assets that can be IPOs are high-quality assets, but for mergers and acquisitions, this definition is not completely accurate.

“There is a big difference between mergers and acquisitions and IPOs. Mergers and acquisitions are about synergy, checking for omissions and filling vacancies. Listed companies will buy what they lack and not have to choose accordingly. with the criteria of the OPI “. , to develop the core business, expand scale, and improve market competitiveness and profitability through mergers and acquisitions, does not necessarily require the purchase of companies that meet IPO requirements and have excellent financial performance.

Furthermore, compared to mature foreign capital markets, the valuation of the primary and secondary markets is not much different. Due to the IPO review and supervision system and other reasons, the valuation of primary and secondary markets in my country’s capital market has been derailed.

As a result, there is a relatively large price difference between IPOs and M&A, but Peng Qinwen believes that the price difference between the primary and secondary markets will not exist forever. From a dynamic development perspective, the registry system has accelerated the speed of corporate IPOs, and the increase in the IPO offering may lower the overall valuation of IPOs in the future.

Peng Qinwen said that when the IPO valuation falls below the M&A value, high-quality assets will choose the M&A form rather than the IPO development form. The time of this “golden cross” is difficult to predict, but logically speaking, this day will come sooner or later.

The right thing is the best

Peng Qinwen believes that for publicly traded companies, there is no uniform standard for good M&A targets, and the most suitable M&A targets are the highest quality M&A targets. During the speech, Peng Qinwen dismantled four types of M&A goals, setting forth the “right is best” principle.

For leading publicly traded companies, choosing the right M&A target is like “rich people” buying brand name goods. This type of company usually chooses large-scale M&A projects, the benefit of the M&A objective is good, and there is the possibility of an initial public offering. ; my country A There are more than 4000 listed companies, but about 70% of them have a market value of less than 10 billion yuan. For these growing publicly traded companies, it is more important to choose profitable M&A targets.

In addition, the search for synergy, transformation and improvement are two important reasons for listed companies to carry out mergers and acquisitions. For publicly traded companies seeking synergy, it is more appropriate to develop M&A objectives with the core business and the same interests. Listed companies can choose small, beautiful targets for mergers and acquisitions; for listed companies looking to transform and upgrade, prescribe the right Medicine “is particularly critical, choose performance. Good acquisition targets with a good track record will become an important factor in determining your future development.

Peng Qinwen said in his speech that China’s M&A market is in the process of cultivation and development, and it is a thriving market. According to its introduction, the usual channels for M&A projects come from brokers, law firms, clubs and other intermediaries, as well as upstream and downstream of the industry chain. PE investment institutions, banks, and consulting firms are also more effective channels.

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