The results of the classification evaluation of this business are released.
On December 25, the Securities Association of China announced the results of the 2023 evaluation of the practice quality of financial advisory business of securities companies.
Guotai Junan, CICC, Zhongtai Securities, China Securities Construction Investment and CITIC Securities were rated Class A. In addition, 28 brokerages were rated as Class B and 8 brokerages were rated as Class C.
Since the beginning of this year, with the changes in the regulatory environment and market environment, the vitality of the M&A market has been stimulated. Brokerage China reporters also learned that securities companies have actively laid out mergers and acquisitions this year, continued to pay attention to the mergers and acquisitions opportunities in the upstream and downstream of the emerging industrial chain and the reform opportunities of central state-owned enterprises, and assisted customers in mining mergers and acquisitions targets and designing transaction structures.
4 consecutive A's
On December 25, the "report card" of the classification evaluation of the merger and reorganization business of securities companies was released. According to the Securities Association of China, during the 2022 evaluation period, a total of 41 securities firms engaged in the financial advisory business of major asset restructuring of listed companies and issued independent financial advisory reports. The reporter noticed that the number of households was basically the same as the previous year's 39.
Judging from the results, a total of 5 brokerages were rated as Class A this year, a further decrease from 8 in the previous year. Among them, four securities firms, CITIC Securities, China Securities Construction Investment, CICC and Guotai Junan, have been rated Class A in this business for two consecutive years. Zhongtai Securities has made progress this year, rising from Class B to Class A in the previous year.
There are 28 securities companies rated as Class B, of which 11 have maintained the evaluation results for two consecutive years, and another 11 securities companies have entered the Class B team for the first time since the China Securities Association revised the "Measures for the Evaluation of the Practice Quality of Financial Advisory Business of Major Asset Restructuring of Securities Companies" last year.
Dongxing Securities, Guojin Securities, and Zhongde Securities were downgraded from Class A to Class B compared with the previous year, and three securities firms, Hualong Securities, China Merchants Securities, and Bank of China Securities, were upgraded from Class C to Class B.
Another 8 brokerages were rated as Class C. Among them, GF Securities, SDIC Securities, and Huayuan Securities have been classified as Class C for two consecutive years, while Tianfeng Securities has been downgraded from Class B to Class C in the previous year.
Last year, the China Securities Association newly revised the "Measures for the Evaluation of the Practice Quality of Financial Advisory Business of Major Asset Restructuring of Securities Companies" (hereinafter referred to as the "Measures"), which was revised in many aspects with the goal of promoting the improvement of the quality of listed companies, and was recognized by the industry.
The first is to expand the scope of evaluation projects. The inclusion of projects such as the issuance of shares to purchase assets (including mergers and divisions) under the registration system and other major asset restructuring projects that do not involve the issuance of shares more comprehensively reflect the actual situation of securities companies engaged in financial advisory business for major asset restructuring.
The second is to highlight the quality requirements of practice. Increase the weight of project quality, add new indicators for project withdrawal, and further strengthen the dominant position of practice quality.
The third is to emphasize business process management. Through the addition of business management indicators, we will inspect the business process management and specific control measures of securities companies such as project approval, quality control, questioning, and kernel, and urge securities companies to effectively implement the "three lines of defense" of internal control of investment banking business, and consolidate the main responsibilities of securities companies.
Fourth, strengthen compliance constraints. Securities companies that have received criminal penalties or administrative penalties for financial advisory business are directly classified as Category C, and the deduction of points for negative behaviors of employees has been added.
Fifth, enhance business innovation incentives with the goal of improving the quality of listed companies. Bonus points will be given to mergers and acquisitions business innovations that produce good economic and social effects, and securities companies will be guided to focus on improving the quality of listed companies. Continuously improve business capabilities.
On December 25 this year, the China Securities Association said that in the next step, the association will, under the guidance of the regulatory authorities, urge securities companies to return to their responsibilities, better play the role of the "gatekeeper" of the capital market, and promote the improvement of the quality of listed companies.
The M&A market has recovered modestly
This year, the M&A and restructuring market has been active, mainly because of changes in the market environment and regulatory environment, and securities firms have ushered in new opportunities in M&A and restructuring business.
Some investment bankers believe that based on the past cycle experience, the current market conditions of the capital market and policy dynamics, the tightening of the IPO rhythm can have a certain positive impact on the activity of the M&A market.
In addition, the new policies for the market-oriented reform of mergers and acquisitions and restructuring have been issued one after another, and the signals are positive, creating good opportunities for the development of mergers and acquisitions and restructuring business. The China Securities Regulatory Commission (CSRC) proposes that, first, appropriately improve the inclusiveness of the valuation of asset-light technology-based enterprise restructuring; second, optimize and improve the review mechanism such as "small amount and fast", and extend the validity period of financial information for share-issuance restructuring; third, introduce relevant rules for listed companies to issue convertible bonds to purchase assets; and fourth, promote central enterprises to increase the integration of mergers and acquisitions of listed companies.
In the view of industry insiders, the proposal of the above policies is conducive to promoting the optimization of mergers and acquisitions and restructuring and the improvement of the quality and efficiency of restructuring.
As the M&A market heats up, regulators, listed companies, venture capital institutions, securities companies and other market entities pay more and more attention to this business. On December 19, the Shanghai Stock Exchange held a symposium on mergers and acquisitions of listed companies in Shanghai to conduct in-depth exchanges on how to stimulate the vitality of the mergers and acquisitions market. Among them, the representative of the brokerage said that considering that technology enterprises are different from traditional industries, with long technology precipitation period, high upfront investment, large growth potential, fast growth rate and other characteristics, the logic of industrial mergers and acquisitions is different, it is recommended to adopt the valuation logic in line with the characteristics of science and technology enterprises for the target of mergers and acquisitions, allow more flexible restructuring payment methods, and appropriately relax the integration of mergers and acquisitions between A-share listed companies.
Brokerage China reporters also learned from previous interviews that since the beginning of this year, some brokerages have increased their investment in mergers and acquisitions. (For details, see "IPO Tightening, M&A and Restructuring to Be Hot? Some Companies to be Listed Are Shaken, Investment Banks Look at It This Way")
For example, the relevant person in charge of Minsheng Securities Investment Bank said that while continuing to maintain and strengthen the company's IPO business advantages, it will further adjust its development strategy, optimize its management model, and strengthen the development of the company's mergers and acquisitions business. Huatai United Securities has three key words in the key layout of the M&A business this year, namely "good enterprise", "good industry" and "helping transformation".
Zhang Zhongwei of China Securities said that on the one hand, it will strengthen the development of customers of central state-owned enterprises, provincial state-owned enterprises and leading enterprises in the industry, and conduct forward-looking analysis and layout of the development strategy and business needs of potential large customers; on the other hand, it will actively strengthen communication with the business departments of the investment banking committee, tap the merger and acquisition needs of old customers, and give full play to the advantages of professional and technical departments in the matrix service of "industry + region + product" of the investment banking committee, and jointly develop new business opportunities.
Editor-in-charge: Tactical Heng
Proofreading: Wang Chaoquan