Mergers and Acquisitions Right After Listing: Listed Companies Accelerate Expansion and Transformation
Recently, among the listed companies that announced suspension for major asset restructuring or had disclosed major asset restructuring plans, many were newly listed stocks. In recent years, with the adjustment of the economic structure, listed companies have been using capital platforms to conduct industry integration, industry chain coordination, and transformation and upgrading through mergers and acquisitions (M&A), accelerating their steps. This has led to many listed companies engaging in mergers and acquisitions right after their listing, constantly playing out the "life-or-death speed" of expansion and transformation. Industry insiders point out that the continuous emergence of "M&A right after listing" cases reflects that listed companies are increasingly using capital platforms to speed up industry integration, industry chain coordination, and transformation and upgrading.
M&A Right After Listing
Recently, Hecoda announced a major asset restructuring plan, intending to acquire most of the equity of Baosheng Automation for 618 million RMB, while raising 172 million RMB to pay for the cash consideration of this transaction.
Hecoda went public at the end of October last year, and in February this year, it announced a suspension for restructuring. In fact, besides Hecoda, newly listed companies such as Shengxunda, Guangxin Materials, Emperor Sanitary Ware, and Zhou Yi Innovation also announced major asset restructuring plans this year.
Some companies have even planned multiple acquisitions within less than a year of their IPO. For example, Jin Guan Electric, which went public in May last year, announced on November 29 that it planned to acquire most of the equity of Nengrui Automation for 1.504 billion RMB through a combination of issuing shares and cash payment. On May 16 this year, Jin Guan Electric released a major asset restructuring progress announcement, planning to acquire all or part of the equity of Zhongli New Materials and Hongtu Diaphragm.
Many newly listed stocks, although they have not yet completed mergers or announced plans, are already "in the process." In April this year, Xuan Ya International, only two months after its IPO, announced that it was planning a major asset restructuring. On May 9, Xuan Ya International disclosed the progress of its major asset restructuring, stating that the target asset for the restructuring was expected to be no less than 50% of the equity of Beijing Milawei Network Technology Co., Ltd., which operates the live-streaming platform "Inke."
Zhongtong Guomai, which went public at the end of last year, announced on March 13 this year that it was suspending its stock, as the company was planning a major event that might involve significant asset restructuring. On May 8, the company stated that the target of this transaction was most of the equity in Jilin Tongjian and Shanghai Gongchuang. Later, the company decided to terminate the acquisition of most of the equity in Jilin Tongjian, but it is still moving forward with the acquisition of most of the equity in Shanghai Gongchuang and raising supporting funds.
The "M&A right after listing" trend of newly listed stocks began in 2014. Industry insiders point out that, on the one hand, many companies that have listed in recent years are in traditional industries, and with the adjustment of the economic structure, some newly listed stocks have a demand to accelerate transformation or expand their main business through mergers and acquisitions; on the other hand, changes in the policy environment have also objectively accelerated the pace of mergers and acquisitions for newly listed stocks.
Changjiang Securities believes that because the financing for mergers and acquisitions is not subject to the 18-month restriction, some newly listed stocks’ refinancing needs may turn into acquisition needs. In terms of feasibility, by reviewing the project financing direction of listed companies since 2014, it can be observed that the funds raised have been mainly used for projects related to the main business, in order to promote the expansion and upgrading of the core business, which can also be achieved through mergers and acquisitions.
Accelerating Expansion and Transformation
Industry insiders point out that the continuous emergence of "M&A right after listing" cases reflects the accelerating pace of listed companies utilizing capital platforms for industry integration, industry chain coordination, and transformation and upgrading.
Industry Integration Through Acquiring Peers: Take Zhou Yi Innovation, which plans to acquire most of Beijing Xicheng’s equity for 6.5 billion RMB as an example. The announcement states that both the listed company and the target company mainly engage in the research, technical support, and sales of integrated circuit memory chips and their derivative products. This transaction is a consolidation and acquisition of a high-quality peer company, and after the transaction is completed, a good scale effect can be achieved. Additionally, by expanding the product categories of memory chips and gradually entering specialized applications, the listed company’s market share will experience further growth.
Achieving Industry Synergy Through Acquiring Upstream and Downstream Companies: For example, Emperor Sanitary Ware stated that as a company engaged in home furnishing and building materials manufacturing, the future strategy will inevitably involve channel layout or strong alliances between various brands through equity relationships. Against this backdrop, the company announced a plan to acquire 98.39% of the equity of Oushennuo for 1.968 billion RMB.
Achieving Transformation Development by Acquiring Emerging Industries: Take Xuan Ya International’s acquisition of Inke Live as an example. According to the information, Xuan Ya International’s main business is integrated marketing communication services, including long-term advisory services and project services. Inke Live is a leading company in the emerging live-streaming industry in China. As of the end of 2016, there were about 200 live-streaming platforms, with a market transaction scale of about 35 billion RMB and 200 million users. Acquiring Inke Live and entering the emerging live-streaming industry will undoubtedly help Xuan Ya International with its transformation and development.