In terms of data alone, the "wind" of the current M&A market has not yet blown. According to the latest data from the Qingke Research Center, although there were some typical cases in the M&A market in February this year, both the number and the amount of transactions declined.
But the M&A market is quietly changing slightly.
On March 21, Morning One Fund announced that Daniel Zhang, former chairman and CEO of Alibaba Group, will join Morning One Fund as a managing partner with founder Liu Xiaodan to explore the new future of M&A funds.
The Morning One Fund joined by Daniel Zhang this time is different from the financial investment fund, which is a fund focusing on the M&A market. Morning One Fund was founded in 2019 by Liu Xiaodan, former president and chairman of Huatai United Securities. Liu Xiaodan is regarded by the market as a "M&A master" who achieves the ultimate in professionalism.
In the view of some industry insiders, in the context of the slowdown in the pace of IPOs, the pressure of fund withdrawal, and the difficulty in financing early-stage projects, VC/PE institutions that are anxious about exiting may promote the emergence of a "wave of mergers and acquisitions", and some of them have taken "mergers and acquisitions" as the main way to create income.
Some institutions said that they would strengthen the layout of M&A funds this year
Wind data shows that as of March 21, a total of 75 IPOs in the A-share market have been voluntarily withdrawn since 2024, an increase of 22.95% compared with the same period last year (61). Among them, a total of 22 companies were withdrawn from the Shanghai and Shenzhen main boards, 20 were withdrawn from the Beijing Stock Exchange, 24 were withdrawn from the ChiNext board, and 9 were withdrawn from the Science and Technology Innovation Board.
From the perspective of industry distribution, according to the industry classification of the China Securities Regulatory Commission, the largest number of computer, communication and other electronic equipment manufacturing industries was withdrawn at 14, followed by 10 special equipment manufacturing companies, 9 chemical raw materials and chemical products manufacturing industries, and 6 pharmaceutical manufacturing and software and information technology service industries.
In terms of sponsors, in terms of the number of projects withdrawn by sponsors, 9 were withdrawn by China Securities Construction Investment, 7 were withdrawn by CITIC Securities and Minsheng Securities, and 5 were withdrawn by CICC. From the perspective of the rejection rate, there are 15 sponsor institutions with a rejection rate of more than 30%, and 8 institutions with a withdrawal rate of 50% or more, of which Zhongyuan Securities sponsors 5 and voluntarily withdraws 4, with a withdrawal rate of 80%.
In the context of the slowdown in IPOs, the pressure of fund withdrawal, and the lack of improvement in the form of early-stage project financing, many guests believed that there may be a big wave of mergers and acquisitions in 2024 at the 2024 (13th) China Capital Annual Conference held at the beginning of the year. Among them, Bi Lei, partner/chief strategic investment officer of Hanhui Capital, said that they have a clear expectation that the IPO will slow down at the end of 2022 and in 2023.
Li Chengyi, founder and chairman of Xirong Venture Capital, revealed that in the past exit projects, the projects that created huge profits were not exited through IPOs.
Yu Hongmei, managing partner and general manager of Chuanghehui Capital, said that (his institution) will also increase mergers and acquisitions and transfer exits this year. She believes that in the context of the slowdown in the pace of IPOs, everyone should strengthen the layout of mergers and acquisitions and even S funds.
Wang Guodong, a partner of Lightspeed Photonics, observed that there may be some new signs in the M&A market in 2024, and the phenomenon of "huddling together for warmth" will appear more.
It is true that there have been some typical cases of mergers and acquisitions in the market recently.
On February 19, Sinoma International increased its capital to Sinoma Cement, with a capital contribution of 4.086 billion yuan. Sinoma Cement is mainly engaged in cement and aggregate business overseas, and is the international business platform of basic building materials of China National Building Materials Group, and currently has three overseas basic building materials investment projects: Zambia Industrial Park, Mongolia Mengxin Cement Production Line and Nigerian Aggregate Production Line. After the completion of this transaction, Sinoma International will accelerate the pace of international development and realize the complementary advantages of the international development of the cement business segment and the engineering service sector.
On February 29, Tongwei Co., Ltd., through its wholly-owned subsidiary, Tongwei Agricultural Development Co., Ltd., successfully acquired 30% of the equity of Shiji Biotechnology held by five subsidiaries of Tianbang Food, at a price of 1.65 billion yuan.
Shiji Biotech is a wholly-owned subsidiary of Tianbang Food, specializing in breeding pig production, with a base scale of 40,000 sows. Tongwei's main business is photovoltaic new energy, feed and related industrial chains, and is not involved in aquaculture business. Tongwei Co., Ltd. tried to breed pig business in 2008, and this transaction is in line with the company's overall strategic layout. After the completion of this transaction, Tianbang Food will be able to focus more on downstream breeding, slaughtering and processing business.
The M&A market has cooled down significantly
At the annual meeting of investors held in 2023, Liu Xiaodan once expressed his opinion that systemic opportunities in China's M&A market have emerged, and M&A funds have ushered in a favorable time and place. She believes that "as one of the earliest practitioners in China's M&A market, following the growth of the market for 20 years, it is the first time that the three M&A driving factors of industrial competition, capital market and corporate governance have appeared at the same time, which is somewhat similar to the fourth wave of M&A in the 70s and 80s of the 20th century in the United States, marking the emergence of systemic opportunities in the M&A market." ”
As early as 2021, Morning One Fund and WuXi AppTec established a medical M&A fund.
On March 9 of that year, WuXi AppTec issued the "Announcement on Participating in the Establishment of Fund Management Companies and Fund General Partners and Related Party Transactions", under which Wuxi AppTec Investment Development Co., Ltd. (hereinafter referred to as WuXi Investment), a wholly-owned subsidiary, planned to jointly invest in the establishment of Suzhou WuXi Hui Private Equity Fund Management Co., Ltd. (hereinafter referred to as WuXi Hui) with a registered capital of RMB 100 million with MeadowSpring, Chenyi Investment Co., Ltd. and Suzhou Private Capital Investment Holding Co., Ltd.
Among them, WuXi Investment plans to subscribe and contribute 45 million yuan, accounting for 45% of the equity, MeadowSpring plans to contribute 25 million yuan, accounting for 25%, Chenyi Investment plans to contribute 20 million yuan, accounting for 20% of the equity, and Suzhou Private Capital Investment plans to contribute 10 million yuan, accounting for 10% of the equity.
It is worth noting that some of the investment companies in which WuXi Convergence and WuXi Investment participated have been deregistered.
According to the announcement, after the establishment of WuXi Convergence, Jiaxing Chenyi Pengying Equity Investment Co., Ltd., a wholly-owned subsidiary of WuXi Investment, MeadowSpring, and Chenyi Investment, and Suzhou Yisu Investment Co., Ltd., a wholly-owned subsidiary of Suzhou Private Capital Investment, intend to act as limited partners, and WuXi Convergence as a general partner to jointly invest in the establishment of Suzhou Qunying Investment Management Partnership (Limited Partnership) with a registered capital of RMB 101 million.
According to the information of the enterprise check, Suzhou Qunying Investment Management Partnership (Limited Partnership) has been cancelled on December 2, 2022.
Behind the cancellation of this investment management company with a registered capital of 101 million yuan, the M&A market has cooled down significantly in recent years.
According to Qingke Venture (01945. According to data from Qingke Research Center, a subsidiary of HK), a total of 103 M&A transactions were completed in China's M&A market in February 2024, with the number falling 44.3% month-on-month and 30.9% year-on-year. Among them, 73 transactions were disclosed, with a total transaction value of about RMB 26.417 billion, down 37.9% month-on-month and 82.3% year-on-year.
Overall, due to the macroeconomic environment, the overall number of deals in China's M&A market increased in the first three quarters of last year compared with the same period last year, but the transaction size continued to decline in the first half of the year.
In the first three quarters of 2023, a total of 1,920 M&A transactions were completed, an increase of 4.9% year-on-year, and the total transaction value reached RMB639.677 billion, down 18.6% year-on-year, and the average transaction size was RMB333 million, down 22.4% year-on-year, due to the increase in small-scale transactions.
What are the difficulties in the development of M&A projects and M&A funds?
Zhu Jun, founding partner and chairman of Zhongsu Capital, said that in fact, many entrepreneurs in China are "rather the head of the chicken than the tail of the phoenix", and good companies are not willing to be merged. In the past few years, when the market was good, there may have been several price limits for a merger and acquisition (stock price gain), but now cross-border mergers and acquisitions have basically not made too many waves (in the stock market).
For example, Zhu Jun said that some listed companies also communicated with them, hoping to invest in some companies for the purpose of mergers and acquisitions around their own company's industrial chain.
However, after analysis, Zhu Jun believes that this is actually more difficult, and the difficulty lies in how to invest, how much to invest, and how much equity to occupy. If the equity is too large, and the later enterprises have developed well, they still want to be listed independently and do not want to be merged; if the development is not good, there is no point in buying them back.
Despite the many difficulties, what changes will the entry of the bigwigs bring to the M&A market?