M&A Activities on the SSE STAR Market Embrace New Trends

Shanghai Securities News, Feng Xinyi

Following the release of the "Eight Measures," merger and acquisition (M&A) activities on the SSE STAR Market have surged, demonstrating distinctive features aligned with the development of new quality productive forces in various industries.

GCH Technology Co., Ltd. has announced plans to acquire more than 51% of Yingri Technology's equity, which is expected to constitute a major asset restructuring. This move will create synergies between the two companies and help GCH Technology Co., Ltd. penetrate the display industry. Since the release of the "Eight Measures", the SSE STAR Market has reported 96 M&A transactions worth over 22 billion yuan, with 34 new transactions added this year alone. Remarkably, the number of transactions in this category over just three months has matched the full-year figures of last year. Companies that previously disclosed their plans have also made substantial progress; multiple acquisitions involving Shanghai Sanyou Medical Co., Ltd., United Nova Technology Co., Ltd., and Smartgiant Technology Co., Ltd. are at various stages of advancement.

The M&A activities on the SSE STAR Market are characterized by an increase in control transactions and accelerated integration led by industry leaders. Eight listed companies have introduced new controlling shareholders, primarily industry leaders, with plans to empower SSE STAR Market-listed companies.  For example, RRII has acquired shares from the controlling shareholder of Nanjing Wondux Environmental Protection Technology Corp., Ltd. to engage in business cooperation in resource recycling; Kingsemi Co., Ltd. intends to bring in NAURA Technology Group Co., Ltd. as a controlling shareholder to fill product gaps of NAURA Technology Group Co., Ltd. in areas such as coating, developing and high-end chemical cleaning.

The transactions also exhibit new trends: First, the transaction targets are diverse. Many companies planning to IPOs have shifted towards M&A instead. For instance, Primarius Technologies Co., Ltd. acquired the equity of Analog Circuit Technology Inc. and its subsidiary. Analog Circuit Technology Inc. had previously withdrawn an IPO application. This acquisition enhances Primarius Technologies Co., Ltd.'s overall competitiveness. Additionally, Shanghai Bright Power Semiconductor Co., Ltd. planned to acquire Sichuan E-Charging Technology Co., Ltd. to complement its product matrix. Companies listed on the SSE STAR Market also expanded internationally through the acquisition of high-quality overseas businesses, such as Gstarsoft Co., Ltd.'s acquisition of Hungary's CadLine, which offers self-developed BIM products and access to the overseas market.

Second, the valuation method is market-oriented. Many companies have adopted valuation methods that adapt to new quality productive forces to reflect the value of technological innovation. For example, Sansure Biotech Inc.'s acquisition of Zhongshan Sinobioway Hygene Biomedicine Co., Ltd. has established an upward valuation adjustment mechanism that encourages the target company to grow stronger.

Third, the transaction design is flexible. There has been an increase in transactions with flexible performance commitment arrangements in the absence of statutory performance commitments. Companies like Asiainfo Security Technologies Co., Ltd. and Jiangsu HHCK Advanced Materials Co., Ltd. have made acquisitions without performance commitments. In the case of Hwatsing Technology Co., Ltd.'s acquisition of the remaining stake in Xinyu Semiconductor, due to the target's unstable profitability, two sets of performance commitment assessment metrics were established, linked to payment schedules, along with requirements for the performance commitment party to increase their shareholdings to align interests.

The above information is provided for reference purposes only and does not constitute investment advice.