On May 16th, the China Securities Regulatory Commission (CSRC) released the revised "Management Measures for Major Asset Restructuring of Listed Companies" (hereinafter referred to as the "Management Measures"), and the Shanghai, Shenzhen, and North stock exchanges simultaneously revised and released the restructuring review rules and supporting business guidelines. In September last year, the China Securities Regulatory Commission issued the "Opinions on Deepening the Reform of the Mergers and Acquisitions Market of Listed Companies" (also known as the "Six Articles on Mergers and Acquisitions"). This revision further implements relevant measures, reduces transaction costs, further stimulates the activity of the mergers and acquisitions market, improves the quality of listed companies, and better plays the role of the capital market hub by improving audit efficiency, enhancing regulatory inclusiveness, improving transaction flexibility, and encouraging private equity funds to actively participate. Tian Lihui, Dean of the Institute of Financial Development at Nankai University, stated in an interview with reporters that this revision is a key leap in the transformation of the capital market from a "financing tool" to a "resource allocation center". By innovating the system to accurately address market pain points, it not only loosens the burden of strategic mergers and acquisitions, but also strengthens the bottom line with "big data monitoring+lifelong accountability", marking the entry of China's capital market into a new cycle of "high-quality mergers and acquisitions driving industrial upgrading". Improve audit efficiency and encourage leading enterprises to become better and stronger. This revision introduces a simplified audit procedure for restructuring, which implements a "2+5+5" audit mechanism for two types of transactions. The exchange accepts the transaction within 2 working days and issues an audit opinion within 5 working days, without the need for review by the exchange's merger and acquisition committee. The China Securities Regulatory Commission makes a decision to register or not register within 5 working days. The first type is the absorption and merger between eligible listed companies, which not only helps top enterprises integrate resources, improve industrial concentration, but also helps to further smooth the channels for A-share delisting and improve the quality of listed companies. Regarding this, Li Qiusuo, Chief Domestic Strategy Analyst of the Research Department of China International Capital Corporation (CICC), stated in an interview with reporters that this is expected to provide more diverse channels for listed companies to voluntarily delist, promoting the formation of a virtuous cycle of both in and out in the A-share market. Simplifying the review process can help promote industry integration and the formation of leading enterprises. It is an important measure to deepen capital market reform, promote market-oriented and rule of law development in mergers and acquisitions, and better play the decisive role of the market in resource allocation. ”Li Xiao, Deputy Director of the Capital Market Regulation and Reform Research Center at Central University of Finance and Economics, stated in an interview with reporters. The second type is the application for high-quality companies with standardized operations, a market value exceeding 10 billion yuan, and an information disclosure quality evaluation of A for two consecutive years to issue shares to purchase assets without constituting a major asset restructuring. Li Qiusuo stated that this is to reward companies that have excellent information disclosure, good communication with the market, and have contributed to improving the overall quality of the market, encouraging listed companies to improve the quality of information disclosure. On the other hand, setting up a simple channel for high-quality companies with high market value and high information disclosure quality is also a positive incentive to guide listed companies to improve their own quality. In the eyes of market participants, streamlining processes can reduce market transaction costs and stimulate market vitality. In the eyes of industry insiders, this move aims to encourage leading companies to grow bigger, better, and stronger through a "small steps, fast pace" approach. By passing the '2+5+5' rapid review, efficiency will be greatly improved. ”Tian Lihui stated that this move sends a signal of support for the integration of leading companies, encouraging industry leaders to achieve "strong alliances" through absorption and merger; Assisting the development of new quality productivity, mergers and acquisitions of high-quality technology enterprises will significantly accelerate in the future. At the same time, in order to support the absorption and merger of listed companies, this revision has also improved the lock up period arrangement, clarifying that the lock up period for the controlling shareholder and actual controller of the merged party is 6 months. It should be noted that although the program has been simplified, the requirements for substantive compliance of transactions, authenticity, accuracy, and completeness of information disclosure have not been reduced. The relevant rules also specify the negative list that does not apply to the simplified review procedure. ”Li Xiao said. According to the reporter's understanding, in order to avoid the abuse of the simplified review procedure, this revision sets negative situations for the application of the simplified review procedure and strengthens the responsibilities of all parties involved in the simplified review procedure. Enhancing regulatory inclusiveness and improving transaction flexibility and success rate. The "Management Measures" further improve regulatory inclusiveness, enhance the inclusiveness of financial condition changes, interbank competition, and related party transaction supervision of listed companies, and adjust the conditions for issuing shares to purchase assets to "interbank competition that will not cause significant adverse changes in financial condition, will not cause significant adverse effects on new transactions, and related party transactions that seriously affect independence or are clearly unfair". Li Qiusuo stated that increasing the tolerance for changes in financial conditions is more conducive to early-stage science and technology innovation enterprises that have invested heavily in research and development but have not yet formed stable profits, which can help promote the participation of science and technology innovation enterprises in mergers and acquisitions; Improving the tolerance towards industry competition and related party transactions can help companies implement mergers and acquisitions in the same industry and upstream and downstream, thereby achieving the goals of enhancing industrial chain advantages and achieving industrial transformation. In addition, this revision establishes an installment payment mechanism for the consideration of restructured shares, which clarifies the relevant regulations on the validity period of approval documents, issuance conditions, lock up period, and continuous supervision for the payment of consideration for installment issuance of shares. Industry insiders say that installment payment of stock consideration provides a new option for all parties involved in the transaction. Previously, in mergers and acquisitions, only cash purchases of assets could be paid in installments. This revision clarifies that issuing shares to purchase assets can also be paid in installments. The parties to the transaction can choose installment payments and set payment conditions based on the negotiation situation, in order to meet the needs of listed companies to flexibly adjust the number of shares to be paid according to the subsequent operating conditions of the target. Innovative institutional design can fully safeguard the interests of listed companies in the face of significant valuation fluctuations in technology-based enterprises. Li Qiusuo stated that the installment payment mechanism not only alleviates the financial pressure on the acquirer, but also reduces the risk of one-time valuation, especially for science and technology innovation enterprises with strong growth potential but high performance uncertainty to participate in M&A and restructuring transactions. In Li Xiao's opinion, this move can alleviate the short-term financial pressure on the acquiring party, especially for those with relatively tight cash flow but good development prospects, and help facilitate the transaction. In addition, installment payments can be linked to the future performance of the acquired party, forming a closer interest binding mechanism, incentivizing the management of the acquired party to strive to achieve performance commitments, and reducing acquisition risks. Encourage private equity funds to participate in introducing more long-term capital into the market. This reform also introduces a "reverse linkage" mechanism to help private equity venture capital funds exit. The Management Measures stipulate that for private equity funds with an investment period of 48 months, the lock up period in third-party transactions will be shortened from 12 months to 6 months, and the lock up period for shareholders other than controlling shareholders, actual controllers, and their controlled affiliates in restructuring and listing will be shortened from 24 months to 12 months. In Tian Lihui's view, the "reverse linkage" of private equity funds has an incentive effect. Shortening the lock up period can improve the exit efficiency of private equity venture capital funds, attract long-term capital, and optimize risk hedging; Combining performance compensation and installment payments to reduce the risk of "bet failure". Li Qiusuo stated that introducing a "reverse linkage" mechanism to compensate for long-term investments by shortening the exit cycle can help promote more private equity participation in mergers and acquisitions, and introduce long-term funds into the M&A market. On the one hand, the lock up period of private equity funds with longer investment periods can be reduced, which helps encourage long-term funds to participate in mergers and acquisitions. Long term funds have a longer-term investment perspective and place greater emphasis on long-term development. For start-up companies, especially those that have invested heavily in research and development but have not yet formed stable profits, stable support from long-term funds is particularly important. On the other hand, shortening the lock up period helps with capital circulation, reduces liquidity risk, effectively alleviates the problem of "difficult exit", and facilitates a virtuous cycle of "fundraising, investment management, and exit". It is worth noting that while stimulating the vitality of the M&A and restructuring market, regulatory authorities have strengthened information disclosure and in-process and post event supervision, focused on preventing risks and protecting investor rights, and maintained a standardized and orderly market environment. Li Qiusuo stated that the comprehensive implementation of the "Six Measures for Mergers and Acquisitions" will have three impacts on the market. Firstly, further increase support for technology innovation enterprises. This revision will help support listed companies in their layout around technological innovation and industrial upgrading, and guide more resource elements to gather in the direction of new quality productivity. Secondly, promote mergers and acquisitions to further shift from virtual to real. The new "National Nine Point Plan" proposes to increase the supervision of "backdoor listing". This reform supports listed companies to implement mergers and acquisitions in the same industry and upstream and downstream, and supports enterprises to carry out cross industry mergers and acquisitions that are in line with commercial logic around the needs of industrial transformation and upgrading. In the future, mergers and acquisitions of listed companies or more industry mergers and acquisitions will be the main focus. Whether it is within the same industry or across industries, the main goals will be industry integration, upgrading, and development. Finally, promoting mergers and acquisitions as an important means to facilitate A-share delisting channels and improve market ecology. (New Society)