Service Hotline: 400-826- 0806

News center

News
行情分析

[Original Research] A Study on the M&A in NEEQ Market

Date: 2015-12-03
Views: 37

Since the beginning of this year, NEEQ has developed very fast. The number of listed enterprises has increased from more than 1,000 at the beginning of the year to current 4,000. The trades almost cover all the fields in the main board market. However at present, the lack of business liquidity in NEEQ market remains a big problem bothering everyone. There is a big gap between the main board market and NEEQ market in business liquidity. To solve the business liquidity problem, on the one hand, the system needs improvements, such as introducing a hierarchical system, auction mechanism, and lower threshold for investors; on the other hand, the listed enterprises need to enhance their own quality, to realize survival of the fittest and resource complementarity. M&A will become an effective way to enhance enterprise quality.

According to incomplete statistics, the number of M&A incidents in NEEQ market in the first 3 quarters of 2015 was 10 times of the total number in 2014. Enterprises on NEEQ also have broken the “merged and acquired” pattern. Now they not only play the role of quality targets in the “target pool”, but also carry out large scale M&A in their trades. What’s more, Huatu Education, an enterprise on NEEQ, realized back-door listing by merging listed company ST Century Plaza Hotel. If we say 2014 was the first year for NEEQ, then 2015 can be called the first year for M&A in NEEQ market. There are mainly 3 reasons:

First, NEEQ market has attracted extensive attention from all kinds of M&A funds and M&A institutions. The number of M&A and the amount involved in 2015 had geometric growth compared with 2013 and 2014. M&A in NEEQ market is not a sporadic phenomenon any more. Some people even think NEEQ M&A market has become a blue ocean.

Second, M&A in NEEQ market already have all the forms and elements of M&A transactions. Compared with 2013 and 2014, not only NEEQ has become a M&A pool and target pool for listed companies on the main board, companies on NEEQ also have started M&A of listed companies on the main board; M&A by companies on NEEQ no longer solely adopt cash payment as in 2014, but begin to adopt share swap, and even share swap +cash payment. In addition, in 2015, cases of back-door listing through companies on NEEQ also have become common.

Third, NEEQ M&A market’s legal system has basically become mature, and shown its advantages. The “Regulations for Acquisitions of Non-listed Public Companies” and the “Regulations for Major Assets Restructurings of Non-listed Public Companies” issued by CRSC on June 27, 2014 created a soft environment for enterprises on NEEQ to take part in M&A. The two Regulations mildly loosened the requirements on the voluntary offer price, method of payment, performance guarantee ability of non-listed public companies in M&A, increased autonomy and operational flexibility, enriched the means of payment, made means of payment like “preferred stock” and “convertible bond” available.

Ⅰ. The Status Quo of M&A in NEEQ Market

According to incomplete statistics, by the end of Oct., 221 companies in NEEQ market had major assets restructurings; 82 companies announced eternal acquisitions; almost one-tenth listed companies in total had M&A, increasing by 8 times on the number 36 in 2014; the amount involved was about RMB 30 billion Yuan, increasing by nearly 10 times on the number 2014.

Enterprises listed on NEEQ now are more normative, have more media exposure, and thus are more favored by listed companies on the main board. Cases of listed enterprise on NEEQ acquired by listed A-share companies by the end of June 2015 are as follows:

In recent years, NEEQ is no longer an M&A target pool for listed companies. Driven by multiple forces, some enterprises on NEEQ begin to take the initiative and look for market opportunities, trying to become dominators in M&A market. The latest data shows, by Nov. 13, 2015, the number of listed companies on NEEQ reached 4,119, including 963 doing transactions through market makers, 3,156 doing transactions through negotiations. The number also has surpassed that of Shanghai Stock Exchange and Shenzhen Stock Exchange. Data of Wind Information shows by Nov. 16, 2015, NEEQ market already had 247 M&A incidents initiated by enterprises listed on NEEQ. The number has far surpassed the total number of M&A in NEEQ market in 2014. In 2015, M&A cases worth more than RMB 50 million Yuan and initiated by enterprises on NEEQ are as follows:

Ⅱ. Reasons for the Outburst of M&A in NEEQ Market

1. The market’s accumulations and developments in the past 2 years

In 2013, NEEQ expanded its capacity. With the development in 2014, M&A in NEEQ market were in the bud and began to sprout. Compared with the main board M&A market which already became increasingly mature, it was 2 years late. The maturity of NEEQ M&A Market in 2015 is closely related to the boom of M&A in the main board market. The sharp increases in the number and value of M&A by listed companies in 2014 and 2015 drove the growth of NEEQ M&A. according to incomplete statistics, in 2014, there were 3,200 M&A cases in the whole market, the amount involved reached RMB 412.48 billion Yuan, accounting for 28.5% of the total transaction value. In 2015, by Oct. 12, there were 3,933 M&A cases by companies listed on Shanghai Stock Exchange and Shenzhen Stock Exchange, including 1,374 cases already completed, 2,463 underway, 96 failed cases already announced. The boom in the whole M&A market has directly driven the development of NEEQ M&A market.

2. The sharp increase in the number of companies providing a good platform for industrial reorganization

At present, the number of companies on NEEQ is already 3 times of that on Shanghai Stock Exchange and 2 times of that on Shenzhen Stock Exchange, more than 30% of that on NASDAQ in America. Companies that are unlisted but satisfy the requirements for M&A targets are becoming less and less. Chinese companies are unfamiliar with overseas markets, so there are various difficulties finding overseas targets. Startup companies with no achievements don’t meet acquirers’ requirements. Thus in NEEQ market, though compared with before, M&A costs have increased, listed companies and companies on NEEQ have to regard NEEQ market as an important battlefield for M&A.

3. Value Discovery of Startup Enterprises

Most startup enterprises face difficulties in financing and integration. Without capital, they cannot introduce more advanced technologies to enhance their productivity, cannot cut their marginal cost through scale expansion. NEEQ provides startup enterprises with a new financing platform. On this platform, enterprises disclose their real information in the market, forming relatively fair market value. In virtue of their fair value, by means of “private placement” or “private placement+ cash”, enterprises can realize industrial M&A at lowers costs. For example, when Dodoca acquired 100% shares of WEIBA, The transaction consideration was RMB 80 million Yuan, including 4.169 million shares issued to the targets for RMB 14 Yuan/share, and RMB 21.63 million Yuan paid in cash. Broader financial channels and lower M&A costs give enterprises an economic basis for industrial large-scale development. With the basis of low-price M&A, listed enterprise began to “hire men and buy horses”, to obtain good technologies and resources in the trade. A market’s development comes from its own needs. The boom of M&A in NEEQ market also came from NEEQ enterprises’ need for development. As reported, M&A in NEEQ market mostly occur around the original industries. Over 80% enterprises carry out M&A to have upstream and downstream integration or horizontal integration on the industry chain. Only a few enterprise choose multi-industry M&A.

4. Advantage in System

A precondition for M&A is financing. In the aspect of private placement, NEEQ has many advantages compared with the main board. Its overall financing efficiency is even higher than that of the main board market. First, small-amount financing by private placements is exempt from examination; second, the refinancing system with one examination for multiple placements can reduce the times of examination. The feedback period for private placements by listed companies with less than 200 shareholders is not longer than 2 weeks. The examination period for private placements by listed companies with more than 200 shareholders is also very short.  Basically, they can receive the reply in a month. In addition, NEEQ market has more financing tools. CSRC has introduced a lot of policies, such as corporate bonds and privately raised corporate bonds, etc.

5. Advantage in Appraisal

With the dim market situation in April 2015, and the downturn in the stock market started in June, at present, NEEQ market’s overall PE is about 35 times. Compared with the main board market, there is still a huge difference in price and certain space for interest arbitrage.

Ⅲ. Means of M&A in NEEQ Market

1. Private Placement+ Cash

For example, Dodoca, the “No.1 Mobile Internet Concept Stock” on NEEQ, released 2 private placement plans, respectively in July and Sept., 2014. In Jan. 2015, it released another financing plan bigger than the total of the previous 2 plans, to acquire 100% shares of WEIBA by means of “Private Placement+ Cash”. The transaction consideration was RMB 80 million Yuan, including 4.1691 million shares issued to the targets for RMB 14 Yuan/share, and RMB 21.63 million Yuan paid in cash. On March 11, Dodoca resumed trading and realized a closing price which increased by 95.66% that day.

2. Equity+ Cash

The acquisition plan announced by Tianhong Laser on Nov. 20 shows it plans to acquire 100% shares of Wuhan Yifi Laser for RMB 230 million Yuan, including 88% paid in equity, 12% paid in cash. After the acquisition, Yifi Laser will issue 10 million additional shares worth RMB 240 million Yuan. Just a month ago, on Oct. 22, Tianhong Laser announced it planned to acquire the carbon dioxide laser asset of SPI Lasers (Shanghai) subordinate to SPI Lasers UK for RMB 5 million Yuan.

3. Share Transfer+ Private Placement

Share Transfer+ Private Placement also is a mainstream mode in the market. After becoming the listed company’s shareholder through share transfers, the acquirer can increase his holding in the company through private placements, so as to obtain the control power. For example, on June 17, Amrdtec announced the company planned to transfer 3.62375 million shares to Shenzhen Gaea Mobile Co., Ltd. and natural person WANG Yanzhi for RMB 3.2 Yuan/share, RMB 11.596 million Yuan in total, promising to transfer its rest shares for RMB 3.2 Yuan/share in 12 months after the first transfer. The capital stock of Amrdtec is RMB 5 million Yuan. After this share transfer, Gaea Mobile became its controlling shareholder; holding and controlling 72.475 % shares in total in Amrdtec, WANG Yanzhi became the actual controller of Amrdtec. After becoming the company’s controller shareholder, the big shareholder further increased his holding by means of a private placement (a subscription in cash).

4. Share Swap

Share swap is the exchange of shares we usually say. By exchanging shares, the acquirer becomes the listed company’s controller shareholder, and the acquirer’s company becomes the listed company’s subsidiary. Asset injection is finished in the process of acquisition. On June 17, Dalian Hi-Think Computer Technology Corp. announced the company swapped its 116 million shares (about 47% of its total capital stock) for Huilv Landscape’s shares worth RMB 148 million Yuan (about 14.53% of its capital stock). Changes thus took place. Huilv Landscape’s Board Chairman LI Xiaoming became the controlling shareholder and actual controller of Dalian Hi-Think Computer Technology Corp. Meanwhile, changes also took place in the main business of Dalian Hi-Think Computer Technology Corp., forming a business scope centered on landscaping construction, landscape design, nursery stock planting, green maintenance.

Ⅳ. The Future Trend of M&A in NEEQ

The future direction for NEEQ should be toward diversified development. For the difference in investees, M&A in NEEQ market is very different from that in A-share market. The future direction for M&A will be industrial integration, to realize synergy in service, management and strategy through M&A.

1. M&A Will Enhance NEEQ Enterprises’ Business Liquidity

By merging with enterprises in the same industry on NEEQ, a company can realize vertical M&A with upstream and downstream enterprises in the industry, to enlarge its strength, form a complete industry chain. This is very helpful for the company’s development and growth. The vertical M&A in related industries by NEEQ enterprises and listed companies also can enlarge NEEQ companies’ and listed companies’ development strength

Through the M&A of listed companies and other NEEQ companies, they can get the monopoly position in certain industry segment. For example, after a merger between several companies in certain industry, they can influence certain product’s pricing, exert a bigger market influence on certain industries. The M&A can improve enterprises’ liquidity. In the future, M&A in NEEQ market will be the main way for most NEEQ enterprises to improve their liquidity.

上市公司也会发生。 
In a word, no matter in NEEQ market or the main board market, in the future M&A won’t be limited to the M&A within NEEQ market, or limited to the M&A of NEEQ companies by main board companies. Cases like NEEQ companies join hands to acquire listed companies also may occur.

2. Scarce Targets Will Become Hot for M&A

The number of listed companies in NEEQ market is big. But in scale and quality, there are still big gaps between most NEEQ companies and main board companies of the same type. NEEQ companies don’t have special advantages in value no matter as acquirers or M&A targets. But due to system advantages and the huge inclusiveness, NEEQ has a group of scarce target enterprises that the main board doesn’t have, such as internet finance and PE investment institutions, etc. In the future, such NEEQ companies with the sense of scarceness may become main M&A targets. The scarceness means some companies have scarce technologies or assets in some industries, and they have become the leaders in some industry segments. Such companies are likely to be acquired by main board companies.

3. Industry Chain Integration Will Become the Main Purpose of M&A

The aim of M&A is to realize resource integration and synergy between the acquirer and the acquired, produce the effect of 1+1>2. The M&A and integration around a platform company’s upstream and downstream industry chain can realize great efficiency improvements and cut transaction costs through brand or technology output. This will be an important direction for future industrial M&A in NEEQ market. Capital can serve the real economy. Through M&A and integration, a company can get stronger competitiveness and advantages in the whole industry chain, realize the 2 wheels of endogenous growth in its own business and extensive expansion after industrial alienation.

Ⅴ. Conclusion

Since the beginning of this year, NEEQ has developed very fast. The number of listed enterprises has increased from more than 1,000 at the beginning of the year to current 4,000. The trades almost cover all the fields in the main board market. However at present, the lack of business liquidity in NEEQ market remains a big problem bothering everyone. There is a big gap between the main board market and NEEQ market in business liquidity. To solve the business liquidity problem, on the one hand, the system needs improvements, such as introducing a hierarchical system, auction mechanism, and lower threshold for investors; on the other hand, the listed enterprises need to enhance their own quality, to realize survival of the fittest and resource complementarity. M&A will become an effective way to enhance enterprise quality.

Compared with the main board market, NEEQ market is more flexible in M&S means and modes. Some investment institutions with innovative spirit also can exert their talents on NEEQ. For example, GGTT realized “PE+ NEEQ”; CSC Group created industrial clusters of listed companies; JD Capital controlled CJI Real Estate and issued additional shares to invest in its funds, etc. NEEQ has brought more space for innovation at the asset end and debt end for investment institutions, and let the market see the facilitating effect of M&A and other capital operation measures on enterprise development. We believe as NEEQ’s system and mechanism keep improving, NEEQ enterprises will close connect to investment institutions; M&A and integration based enterprises’ whole business scope will become more mature and frequent, to enhance enterprises’ value in the capital market through external forces. 

(Author: GGTT Investment Research Department; time: Dec. 3, 2015)


 

News / Related news More
2017 - 12 - 04
Yongquan Forum and Baishaquan · ZUFE Strategic Cooperation Signing Ceremony were held on the afternoon of 3rd December at Baishaquan M&A Block. Yongquan Forum is a major communication and project paring brand created by Baishaquan M&A Block. By hold sharing session and salon or giving speech each month, the forum serves as a communication platform for industry leaders with certai...
2017 - 11 - 30
CAI Gangqing, president and deputy secretary of the Party Committee of Anji Industrial Investment Development Group (IIDG) paid a visit to TTGG with 5 colleagues on the afternoon of 30th November. ZOU Jin, general manager and deputy secretary of the Party Committee of IIDG, FANG Jun, vice-general manager, and other department heads of IIDG attended the discussion. Our managing partner ZHANG Y...
2017 - 11 - 28
Zvi Heifetz, Israeli Ambassador to China, paid a visit to TTGG along with his wife on the evening of 28th November 2017. They were greeted by TTGG’s president YU Baohong. ZHANG Yu and GUO Feng, managing partners of TTGG, LI Xiang, general-manager of Investment Management Department, and other department heads also took part in the meeting.After greeting, YU briefly introduced TTGG’s hist...
2017 - 08 - 14
With the accelerating rhythm of the society, more and more white-collars are feeling stressed under modern work environments. In fact, such stress primarily results from the target-oriented time management. The key factors facilitating their abilities to improve time management efficiency and effectiveness are: how to find the causes of inefficiency, how to distinguish between the important things...
Copyright © 2016 - 2019 Zhejiang Paradise Silicon Valley Asset Management Group Co., Ltd
犀牛云提供企业云服务
X
1

QQ设置

3

SKYPE 设置

4

阿里旺旺设置

等待加载动态数据...

等待加载动态数据...

5

电话号码管理

  • 400-826-0806
6

二维码管理

等待加载动态数据...

等待加载动态数据...

展开