A-share M&A tools expand, experts say next focus is making them 'easy to use'

By Securities Times Reporter Fan Luyuan

Installment payments, directional convertible bonds, differentiated pricing, simplified review procedures, and "reverse挂钩" lock-up periods—these are among the innovations reshaping the structure and efficiency of A-share mergers and acquisitions as the M&A toolkit continues to expand.

Two years ago, the "Six M&A Measures" proposed enhancing payment and review efficiency. Subsequently, the revised Measures for the Administration of Material Asset Restructurings of Listed Companies (the "Restructuring Measures") took effect, introducing mechanisms such as simplified review procedures, installment payments of share consideration, and "reverse挂钩" for private equity funds. These have provided strong support for the persistently active M&A market.

Tian Lihui, a finance professor at Nankai University, noted that a key highlight of this round of M&A system innovation is the shift in regulatory thinking from an approval-oriented approach to a transaction-oriented one. "The toolkit has largely been completed. After solving the question of 'whether it can be done,' the next challenge for the M&A market is how to make the tools 'easy and desirable to use,'" he said.

Innovative Payment Tools

Beyond traditional cash and share acquisitions, directional convertible bonds have emerged as a distinctive payment arrangement in this round of M&A practice. Combining the downside protection of bonds with the upside potential of equities, they offer a compromise solution to pricing deadlocks. In the past two years, diversified "cash + shares + convertible bonds" payment models have gained increasing favor, effectively balancing the interests of all parties.

A typical case is Huahai Chengke's acquisition of a 70% stake in Hengsuo Huawei. Of the total consideration of RMB 1.12 billion:

• RMB 320 million in cash, meeting some shareholders' immediate liquidity needs
• RMB 320 million in shares, locking in long-term shareholders
• RMB 480 million via directional convertible bonds, convertible at a later date

Recent M&A plans by companies such as Pu Ran Shares and Rilian Technology have also adopted combined payment arrangements.

Directional convertible bonds have also broken out of their previous supporting role to become the "protagonist" in some transactions. In August this year, Xindao Technology's acquisition of Shunlei Technology received regulatory approval. Of the total consideration of RMB 402.6 million, directional convertible bonds accounted for RMB 276 million, or 68.6%. This structure significantly reduced the listed company's one-time cash outlay while avoiding rapid equity dilution from a large one-time share issuance.

Installment payments represent a major breakthrough in payment tools. The Restructuring Measures, revised in May 2025, established for the first time a mechanism for installment payments of share consideration. It extended the validity period of the registration decision for "one-time registration, installment issuance of shares to acquire assets" to 48 months and allowed for a combined "installment payment + performance compensation" approach.

Aopumai's acquisition of a 100% stake in Puli Biotechnology, which took effect in December 2025, was the first project under the "Six M&A Measures" to adopt the installment payment mechanism for share consideration. The total consideration was RMB 1.451 billion. For the target company's controlling shareholder and management team, a model of "installment share issuance + direct performance linkage" was adopted. Shares are issued in four tranches, unlocked based on annual performance achievements.

Professor Tian Lihui analyzed that installment payments and contingent consideration transform a one-time negotiation into phased fulfillment, directly addressing two major chronic problems: high goodwill impairment and difficulties in enforcing performance compensation.

Wang Jie, a senior partner at Beijing Dacheng Law Firm, noted that the structure of installment share payments is relatively complex, and application cases remain limited. "The restructuring plan must stipulate conditions for multi-tranche issuance, trigger mechanisms, performance assessment, lock-up periods, and impairment-linked arrangements. It also requires ongoing information disclosure and supervision to ensure compliance in subsequent tranches. The transaction chain is long, regulatory inquiries are numerous, and the workload and intensity for intermediaries have significantly increased," Wang said.

Simplified Review Boosts Efficiency

The Restructuring Measures introduced a new simplified review procedure for qualifying transactions, implementing a "2+5+5" fast-track review:

• 2 working days for acceptance
• 5 working days for review completion
• 5 working days for registration completion

This compresses what was once a months-long review cycle to roughly two weeks.

Eligibility conditions for the simplified procedure include a market capitalization threshold (listed companies must exceed RMB 10 billion), a consecutive two-year "A" rating in information disclosure quality evaluation, and the transaction must not constitute a material asset restructuring.

To date, two A-share transactions have completed restructuring through the simplified review procedure:

• China Shenhua Energy acquired equity in 12 core subsidiaries under the National Energy Group for RMB 133.598 billion—the largest A-share share-issuance asset acquisition project and the first case under the simplified procedure. The transaction was accepted by the Shanghai Stock Exchange on January 30, 2026, submitted for registration on February 6, and took effect on February 11.
• In April this year, the first simplified procedure case on the STAR Market was completed. Zhongwei Company acquired a 64.69% stake in Hangzhou Zhonggui, taking only 10 working days from acceptance to registration.

Driven by policy, A-share M&A review has accelerated overall. For example, Dongfang Securities' M&A project was accepted on August 25 and entered the inquiry stage by August 31. This year, M&A transactions by companies such as CICC, Huahong Hongli, Ruili Kemi, and SMIC all completed the process from acceptance to registration within 100 days.

Alongside the simplified procedure, a "small and fast" channel for small-value transactions continues to operate in parallel, significantly invigorating the M&A market. Based on the date of first disclosure, since the "Six M&A Measures" were released, listed companies as acquirers have initiated over 2,900 M&A transactions, with more than 80% having a consideration of no more than RMB 500 million.

"Reverse Hooking" of Lock-up Periods

The implementation of "reverse挂钩" lock-up periods for private equity funds addresses the pain point of investor exit difficulties. According to the Restructuring Measures:

• For private equity funds with an investment period of 48 months or more, the lock-up period in third-party transactions is shortened from 12 months to 6 months.
• In restructuring for backdoor listings, the lock-up period for shareholders other than the controlling shareholder, actual controller, and their related parties is shortened from 24 months to 12 months.

This incentive rule—"the longer the investment cycle, the looser the exit constraints"—effectively smooths the "fundraising, investing, managing, and exiting" cycle, guiding private equity institutions to transform from short-term financial investors into patient capital that deeply engages with industries and accompanies enterprise growth.

In the Aopumai-Puli Biotechnology acquisition, four private equity funds that met the long-term investment requirements benefited from the "reverse挂钩" policy, with their share lock-up periods significantly shortened. The flexible exit cycle has improved capital turnover efficiency and returns for long-term industrial investments, further stimulating professional investment institutions' enthusiasm for participating in industrial M&A.

The "reverse挂钩" policy has also opened up greater possibilities for private equity fund participation in M&A. The "Six M&A Measures" explicitly support private equity funds in legally acquiring listed companies for the purpose of promoting industrial integration. In January 2026, Qiming Venture Partners completed the equity transfer of Tianmai Technology through its M&A fund, becoming the first case of a market-oriented venture capital firm taking control of a listed company since the "Six M&A Measures" were released.

"However, a shortened lock-up period does not necessarily mean a smooth exit," Professor Tian Lihui cautioned. "Restrictions on share reduction ratios, S-funds and continuation funds are still in pilot phases, and discount rules and fault tolerance for state-owned share transfers remain unclear. If the exit link is missing a piece, the front-end incentives will be discounted."

From "Usable" to "Easy to Use"

Since the innovative tools were introduced, their usage has diverged. Applications of convertible bonds, differentiated pricing, and relaxed M&A loans have reached a certain scale, while simplified review procedures, installment payments, and "reverse挂钩" remain limited to individual cases. Professor Tian Lihui believes this divergence is healthy, indicating that the tools have not been overused, and only transactions with genuine industrial logic have been successfully implemented.

Professor Tian noted that some innovative tools see limited application partly due to high institutional thresholds. "The simplified review sets market cap and information disclosure rating thresholds and requires that the transaction not constitute a material asset restructuring. However, transactions that are truly time-sensitive are often industrial integrations exceeding RMB 10 billion, which naturally constitute material restructurings and thus cannot enter the fast track. Similarly, the 'reverse挂钩' requires private equity funds to have invested for at least 48 months and not be controlling shareholders or their related parties—counterparties that meet both conditions are inherently scarce."

Wang Jie added that commercial considerations and insufficient market awareness among transaction parties also contribute to the limited use of new tools. "For example, installment payments have been in place for a short time, with insufficient benchmark cases. Supporting accounting treatments, share reduction rules, and information disclosure guidelines need refinement. Most intermediaries lack practical experience and prefer traditional structures to avoid the risks of inquiries and disputes over novel structures."

Professor Tian further pointed out that a more important reason is the lack of channels to absorb hidden costs. "Installment payments turn consideration into future shares, requiring sellers to bear the risks of stock price fluctuations and potential repurchase if performance targets are missed. The fair value changes of contingent consideration are recorded in current-period profit and loss, causing many CFOs to shy away due to earnings volatility."

How to move the toolkit from "usable" to "easy to use" has become the focus of the next phase of policy guidance.

Professor Tian Lihui believes that the institutional framework must first shift from an identity-oriented to a quality-oriented approach. "The entry point for simplified review should be expanded to open a fast track for major restructurings involving integration of main businesses under common control, supply chain strengthening and supplementation, and those with good information disclosure records."

Wang Jie suggested that regulators should continue to guide transaction parties toward long-term pricing thinking. "In the past, M&A mostly adopted a one-time buyout model. In the future, the pricing logic needs to shift toward value linkage and phased realization. This is particularly important for M&A targets with technological attributes and significant earnings volatility."

Regarding implementation details, Professor Tian recommended:

• Standardizing installment payments as a standard component
• Issuing guidelines linking installment payments with performance compensation
• Simplifying templates for share registration and disclosure across tranches
• Studying the connection with special tax treatment

For "reverse挂钩," he suggested a segmented design extended to share reduction arrangements for shares acquired in M&A, ensuring that shortened lock-up periods truly translate into "smooth exits."

On the financing side, the scope of M&A loan pilot programs for technology companies should be expanded, recognizing intellectual property and future revenue rights as collateral. On the market side, the establishment of national-level M&A funds should be accelerated, S-funds and continuation funds should be institutionalized, and investment banks and valuation institutions capable of pricing unprofitable hard-tech companies should be cultivated. Insurance, wealth management, and annuity funds should be guided to become counterparties for installment payments and convertible bonds.