Merger And Reorganization Meeting Rate Is Less Than 80%! The Way Of Investment Bank'S Anxiety To "Break The Situation" Under The Registration System Due To Insufficient Competitiveness Of Underlying Assets

On the evening of October 21, the purchase of assets by Lianming shares (603006. SH) and Dexin transportation (603032. SH) were both rejected. The next day (October 22), the stock prices of both companies fell sharply, with Lianming shares down 9.84% and Dexin transportation down 9.95%.

Although one of them is to purchase affiliated enterprises with high premium to enhance the synergy benefits, and the other is to inject new assets into the company to get rid of the operating difficulties due to the decline of performance, the reasons are astonishingly consistent: "the core competitiveness of the underlying assets and the rationality of the transaction valuation are not fully explained, and the transaction is not fully disclosed to improve the asset quality of listed companies".

Behind the failure of the merger and acquisition of the two listed companies, the market is deeply anxious about the decline of the quality of the target under the registration system.

"The rejection rate of restructuring has been higher than that of IPO this year, and most of the better companies have gone to IPO. It's hard to get a good quality of the target." Wang Jiyue, a former senior sponsor representative of a securities firm, pointed out to reporters of the 21st century economic report.

The meeting rate of restructuring declined significantly

From the perspective of public information, there is a high premium for the acquisition of the two listed companies.

Among them, Lianming plans to purchase 100% equity of Lianming packaging with 582 million yuan. The latter is mainly engaged in the planning, design, manufacturing and on-line services of packaging equipment, mainly concentrated in the automobile industry. The book value of net assets in the consolidated statements is 93.6475 million yuan. This means that the value-added rate of this acquisition is as high as 521.48%.

From the operating data, from January to May of 2018, 2019 and 2020, the operating revenue of Lianming packaging was 262 million yuan, 285 million yuan and 72.3634 million yuan respectively; the net profit attributable to the shareholders of the parent company was 48.6814 million yuan, 50.5109 million yuan and 17.3499 million yuan respectively, but the net profit after deducting non-profit was only 8.42 million yuan, 40.63 million yuan and 17.07 million yuan respectively, which fluctuated greatly.

From the perspective of performance stability, Lianming packaging's suppliers are also quite concentrated. From 2018 to 2019 and the first five months of 2020, Lianming packaging's purchase amount from the top five suppliers was 46.1268 million yuan, 44.22 52 million yuan and 8.49 79 million yuan respectively, accounting for 54.03%, 49.88% and 39.46% of the total procurement.

The acquisition of 90% equity of Zhihong precision by Dexin transportation not only has a high premium, but also involves cross-border M & A.

According to the public information, Dezhou Xinjiao transport was established in 2003, and its main business includes road passenger transport and bus station business. Zhihong precision mainly produces high-precision die, high-precision die-cutting cutter and other products which are used in the field of lithium-ion battery electrode sheet forming and manufacturing, and provides relevant technical services.

Transaction data show that the initial price of the 100% equity of Zhihong precision is RMB 700 million, which is about 698.29% higher than the book value of its net assets of RMB 88 million.

According to the contents of the announcement disclosed by the two listed companies, the reasons why they were rejected are as follows: "the applicant failed to fully explain the core competitiveness of the underlying assets and the rationality of the valuation of the transaction. The failure to fully disclose the transaction is conducive to improving the asset quality of the listed company, which is not in line with the provisions of Article 43 of the administrative measures for material assets reorganization of listed companies."

This is not the case. Since 2019, despite the frequent occurrence of new M & A policies, including the issuance of directional convertible bonds, the implementation of new restructuring rules, and the spin off listing, the regulatory approval has been greatly accelerated, but the M & a market has not been significantly active, and the first backdoor of GEM has not been "broken".

Many industry insiders point out that under the registration system, high-quality underlying assets will choose IPO channels instead of being reorganized into listed companies.

According to wind data, since 2019, a total of 332 secondary listed companies have issued major asset restructuring plans, but only 132 of them have completed the reorganization, accounting for less than 40%. In addition to 84 companies that have clearly indicated that the restructuring has failed or whether the issuance examination will be approved, other reorganizations are still in normal progress.

In the same period, the approval rate of the M & A and reorganization committee is far lower than that of IPO. Since 2019, there have been 192 reorganization meetings, but 157 enterprises have passed, with a pass rate of 81.77%, and the passing rate of IPO in the same period is as high as 92.3%.

Among them, the meeting rate of M & A in 2020 is as low as 78.57%, which is significantly lower than that of 85.42% and 83.06% respectively in 2018 and 2019.

Debate on "downturn" of M & a market

After a detailed study of the successful cases of the buyer's restructuring since this year, the 21st century economic report reporter also noticed that most of them are domestic mergers and acquisitions, and most of them are cash payment, while the enterprises adopting cash + equity payment are mostly vertical areas or upstream and downstream mergers and acquisitions with high synergy.

"This shows that in recent years, the continuous and strict supervision of" three high "transactions and blind cross-border mergers and acquisitions has achieved remarkable results. This is what we are happy to see." South China, a medium-sized securities firm investment banking department, said in an interview.

However, on the other side of M & a market becoming more rational, with the curtain of registration system slowly opened, high-quality assets are also drying up. At the moment when the success rate of M & A has been significantly reduced, many investment banks engaged in M & a reported to reporters that it is increasingly difficult to find high-quality M & A targets.

"Have to wait, to the listing shell is not worth money, (enterprises) will still choose to sell, good mark needs to wait." Wang Jiyue said.

However, on the other side of the downturn of M & a market, the integration of the real industry may face new difficulties.

A senior executive of a medium-sized medical manufacturing industry listed company in South China told reporters that due to the smooth listing Road, the high-quality M & A assets that they like prefer to go through the IPO channel and choose to be listed on their own, which is not conducive to the industry's M & A integration.

A report on the prediction of M & a market in 2020 by the Federal Reserve securities also pointed out: "with the acceleration of the registration system of the science and technology innovation board and the growth enterprise market, the IPO channels of small and medium-sized enterprises have never been smooth, which is of great significance to the promotion of China's economic development. However, for some industries that need special scale effect, the smooth IPO may not be a good thing."

For example, the scale effect of the pharmaceutical industry is very obvious, but many small and medium-sized pharmaceutical companies can successfully go public with one or two drug numbers and 30-50 million profits, instead of accepting the merger and reorganization of leading enterprises, which not only leads to the failure of Pfizer and Johnson & Johnson in China, but also leads to low-level repeated construction due to a large amount of raised funds.

Therefore, in the report, the Federal Reserve securities called for: "it is necessary to add restrictive conditions to the IPO of some specific industries, so as to reduce the difficulty of IPO of high-quality leading enterprises in the industry, and further promote the supply side structural reform of these specific industries."

But some people in the industry believe that the restructuring market should not be too hot. In Wang Jiyue's view, M & A should be a market transaction, not driven by policies. Large companies tend to develop through M & A, but this is a survivor bias, a large number of M & a risk is higher.

Wang Jiyue pointed out: "listing is the right of a company. It is better for the market to screen and eliminate. It is not necessary to judge whether resources are wasted or not. The market is a better resource allocation scheme.".

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