Li Mingzhu / watchmaking
Securities Times reporter Li Mingzhu
As the source of living water, the primary market continues to discover and cultivate high-quality potential listed companies, which is an important part of the high-quality development of the capital market. Investing well, cultivating well, and retreating well are the keys to smoothing the circulation of the primary and secondary markets. Recently, the Securities Times and the National Alliance of Venture Capital Associations, together with venture capital associations in many places, launched an industry survey on the prosperity of the primary market to find answers to the common concerns of the industry. The questionnaire covered many first-line venture capital institutions in Beijing, Shanghai, Shenzhen, Sichuan, Shaanxi and other places, covering state-owned, private and foreign capital, analyzed the core problems existing in all aspects of fundraising, investment, management and withdrawal, and gave relevant suggestions.
According to the results of the questionnaire survey, the institutions surveyed are still focusing on science and technology investment, and nearly seventy percent of the institutional investment is concentrated in the A round, with an average investment amount of 10 million yuan to 30 million yuan. From the perspective of exit channels, 98.25% of venture capital institutions tend to exit their projects and list them on the Growth Enterprise Market and the Science and Technology Innovation Board. However, in the face of the slowdown of A-share IPOs, mergers and acquisitions are expected to exit by institutions. They hope that, in the context of policy support, they will further broaden the financing channels for mergers and acquisitions and encourage innovative mergers and acquisitions. They believe that the active M&A market is expected to help the venture capital industry invigorate the overall situation.
Technology investment remains the main line
Institutions tend to invest early and invest small
The venture capital institutions participating in the survey are mainly medium and large. 39% of institutions with a fund management scale of more than 10 billion yuan, and nearly 40% of institutions with a scale of 1 billion yuan to 5 billion yuan. According to the survey, in terms of investment direction, the surveyed venture capital institutions mainly invest in science and technology, and their investment is concentrated in advanced manufacturing, semiconductor and electronic equipment, artificial intelligence, medical health and cutting-edge technology.
However, due to the internal and external environment, venture capital institutions are cautious in their investment this year. The survey results show that 40.35% of the interviewed venture capital institutions have new investment of less than 100 million yuan, and 35.09% of venture capital institutions have new investment of 100 million yuan to 500 million yuan. Combined, more than 75% of the new investment during the year was less than 500 million yuan.
From the perspective of the average investment amount of venture capital institutions in a single project, projects of 10 million yuan to 30 million yuan accounted for 52.63%. 15.79% of the total accounts for less than 10 million yuan, and the two together account for nearly 70%. The proportion of a single investment of more than 50 million yuan is less than 10%. Institutions are tight on large investment in projects, although there are factors that focus on early investment and small investment, but there are also considerations to cherish funds more.
In terms of investment stage, nearly seventy percent of venture capital institutions mainly participate in Series A investment, which is consistent with the average investment amount of 10 million yuan to 30 million yuan, followed by Pre-A and B rounds, with an obvious trend of early investment and small investment. From the perspective of the respondents' choice of the listing location of the invested companies, 98.25% of the institutions chose the ChiNext and the Science and Technology Innovation Board, followed by the main board and the Beijing Stock Exchange, and Hong Kong stocks and U.S. stocks were the second choice.
Among the venture capital institutions surveyed, 52.63% of them have listed and exited since July last year.
In addition, since July last year, 42.11% of institutions have exited through mergers and acquisitions and other means.
Institutions are calling for the relaxation of mergers and acquisitions
At a time when "exit" has become a key node in the development of the venture capital market, the respondents have a high demand for smooth exit channels. More institutions are making M&A a priority for future project exits.
A leading domestic dollar fund said that the current structure of the private market based on IPO exit needs to be transformed urgently, and the balanced development of IPO, mergers and acquisitions, S funds and other exit methods should be realized, and mergers and acquisitions should be dominant, which can better ensure the exit income and provide more certain investment income prospects for patient capital, which is also the experience gained by the developed private equity market after multiple rounds of cycle tests.
Based on the content of the responses of the participating institutions, the institutions called for the unbundling of the M&A process, further simplification of the approval process, the broadening of financing channels for M&A and restructuring, and the encouragement of innovative M&A models, so as to promote the moderate acceleration of M&A and restructuring.
"The M&A policy review is too strict, the M&A requirements for listed companies are too high, and the approval speed is too slow, resulting in the M&A market is not active enough, and it has not yet become a supplementary exit method for IPOs. If 100-200 listed companies can be reviewed and approved every year to standardize the M&A market, then the role of M&A as an exit channel will be improved. Xiao Shuilong, chairman of Shenzhen Chuangdong, told the Securities Times.
Some local small and medium-sized venture capital institutions in Shenzhen focusing on vertical fields also pointed out the difficulties faced by mergers and acquisitions: major asset restructuring has relatively strict policies and reviews, which makes it difficult to promote mergers and acquisitions; Small-scale asset restructuring, due to problems such as the valuation system, is prone to price inversion, which will also cause M&A transactions to fail.
Some venture capital institutions focusing on the medical field suggest that as long as a large number of emerging industry projects invested by venture capital are in line with the development logic of the main business of listed companies, the acquisition should not be subject to too much review and control, whether it is a cash acquisition or a share acquisition, the market-oriented merger and acquisition method is the most effective.
Zhang Quanxun, vice president of Yuanzhifuhai, put forward four suggestions for the development of the M&A market. The first is to strengthen market-oriented reforms and simplify and optimize the review process. It is recommended to further optimize the review mechanism, simplify and optimize the review process of M&A and restructuring, and clarify the review rules for different types of M&A and restructuring matters, so as to improve the review efficiency. The second is to strengthen market-oriented reforms and improve the inclusiveness of valuation. It is suggested to further play the role of the market in price discovery and competition negotiation, conform to the law of industrial development, and enhance the tolerance of valuation in the process of mergers and acquisitions. The third is to support listed companies to carry out industrial transformation through mergers and acquisitions. It is recommended to further support listed companies in traditional industries to focus on scientific and technological innovation and industrial upgrading, and transform to new quality productivity through mergers and acquisitions. Fourth, attract the participation of social capital and support scientific and technological innovation. It is recommended that the policy further encourages and supports social funds such as long-term capital and industrial capital and specialized M&A funds to participate in the M&A and restructuring of listed companies, and give full play to their role in industrial integration and value creation.
The policy is favorable
It is expected to activate the market
Since the beginning of this year, the policy has been blowing frequently, and the China Securities Regulatory Commission has repeatedly stated that it will take multiple measures to activate the merger and reorganization market. More and more market players are actively using mergers and acquisitions to become bigger and stronger, and the mergers and acquisitions of the capital market have entered a new window period.
In April, the new "National Nine Articles" were promulgated, encouraging listed companies to focus on their main business and comprehensively use mergers and acquisitions, equity incentives and other methods to improve the quality of development. In June, the release of the "Eight Articles of the Science and Technology Innovation Board" further strengthened the support for mergers and acquisitions and restructuring policies, strengthened support for hard technology enterprises, encouraged enterprises to carry out industrial mergers and acquisitions and actively extended the industrial chain.
Recently, mergers and acquisitions have ushered in favorable policies. On September 24, the China Securities Regulatory Commission (CSRC) issued the "Opinions on Deepening the Market Reform of Mergers and Acquisitions of Listed Companies" (hereinafter referred to as the "Six Articles on Mergers and Acquisitions"), and simultaneously solicited opinions on the revision of the "Measures for the Administration of Major Asset Restructuring of Listed Companies". The "Six Mergers and Acquisitions" adhere to the market-oriented direction and vigorously give full play to the role of the capital market as the main channel in the mergers and acquisitions of enterprises.
Some small and medium-sized venture capital institutions in East China said that mergers and acquisitions are ushering in new opportunities for institutions, and the "six mergers and acquisitions" for private investment funds have put forward "support" in many places, which means that the regulator has a strong support attitude towards private investment funds participating in the mergers and acquisitions of listed companies.
The Securities Times reporter learned from the Shaanxi Venture Capital Association that the merger and acquisition policy of Shaanxi Province is moving towards the trend of high-quality development, by promoting the restructuring and optimization of provincial enterprises, and encouraging listed companies to expand their scale and market value through mergers and acquisitions, the policy is actively promoting industrial upgrading and economic structure optimization.
According to the research report of Soochow Securities, in the third quarter of this year, a total of 57 A-share listed companies disclosed the progress of mergers and acquisitions, setting a new high in a single quarter since 2018.
Some brokerage investment bankers pointed out that from the perspective of the entire market, mergers and acquisitions are mainly concentrated in strategic emerging industries such as biology, a new generation of information technology and new energy, which is closely related to the policy orientation of developing new quality productivity and promoting industrial integration, and is also consistent with the main direction of venture capital institutional investment.
Wind data shows that since the release of the "Eight Articles of the Science and Technology Innovation Board", a total of 61 companies on the Science and Technology Innovation Board have issued mergers and acquisitions announcements for the first time. On June 21, Xinlian Integrated announced that it intends to acquire the remaining 72.33% equity of its shareholding company Xinlian Yuezhou through the issuance of shares and cash, which is known as the first merger and acquisition plan after the "Eight Articles of the Science and Technology Innovation Board".
The person in charge of a venture capital institution involved in the merger and acquisition transaction revealed that after the shares held by the listed company were wholly acquired, it will successfully realize the exit after two years of investment in Xinlian Yuezhou, although the final transaction has not been completed, but this representative merger and acquisition case, to its institution has accumulated a valuable exit experience, and there are currently three or four projects in the docking buyer, mainly listed companies.
"We have done a lot of layout around the upstream and downstream of semiconductors, and some excellent targets have been invested through mergers and acquisitions of listed companies, on the one hand, it is conducive to further consolidating its main business, strengthening the chain, becoming bigger and stronger, enhancing its own industrial competitiveness, enhancing the ability of long-term stable dividends, and attracting patient capital to enter the market." "On the other hand, for listed companies that are eager to transform and find the second growth curve, if they seize the opportunity, make good use of M&A and restructuring tools, and inject high-quality assets to achieve business transformation and upgrading, they can also enhance investment value and inject vitality into the capital market." ”
He also pointed out that if the current policy can remain stable, it is expected that venture capital institutions will vigorously expand mergers and acquisitions in the fourth quarter, and the real blowout period may appear in the first half of next year.