On February 9, a flurry of announcements emerged from several publicly listed companies in China, including Dongfeng Technology, Great Wall Military Industry, and Dong'an PowerThese announcements indicated potential changes in their controlling shareholders or indirect shareholder structures, predominantly involving two of China's major state-owned enterprises (SOEs): China North Industries Group Corporation (Norinco) and Dongfeng Motor Corporation.

This wave of announcements suggests a significant revitalization in the mergers and acquisitions (M&A) landscape in China, hinting at an elevated activity level in the industryExperts are observing this trend closely, marking distinct characteristics in the recent M&A pattern: a surge in acquisitions focused on "hard tech," an acceleration of restructuring efforts among central and state enterprises, and a renewed wave of consolidation within the brokerage sectorWith regulatory bodies enhancing mechanisms around the valuation of M&As and payment instruments, the forecast indicates that the market is poised for further growth, promising a stream of noteworthy cases emanating from these developments.

The emergence of "hard tech" firms leading the acquisition spree is particularly notableOn February 5, Lingdian Electric Control announced its intent to acquire a total of 98.426% equity in Aoyikex through a combination of stock issuance and cash payment directed at 27 different transaction entitiesLingdian positions itself within the automotive power electronics control systems sector, where it finds significant synergies with Aoyikex, suggesting a promising alignment of market resources, product supply chains, and technological expertise.

The rationale behind this acquisition reflects a broader strategy among "hard tech" companies to bolster their investment value through M&A activitiesIn addition to Lingdian, several other noteworthy transactions have surfaced recently, demonstrating this trend

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Aisan Holdings is planning a purchase of control in Banno New Material through similar financing methodsMeanwhile, Jinlihua Electric is aiming to acquire equity in Haide Lisen, and Bid Medical has set its sights on acquiring Combi Blocks, a global leader in the molecular building block industryEach of these cases illustrates a proactive approach within the technology sector to consolidate power and enhance market presence.

According to Qin Peijing, Chief Strategy Analyst at Citic Securities, the current M&A wave can be categorized into two primary directions: on one hand, there are intra-industry mergers and acquisitions geared toward expanding and strengthening market positions, particularly evident in sectors like electronics, medical devices, and automotive componentsOn the other hand, there are cross-industry acquisitions seeking to foster new production capabilities and drive industrial upgrades.

As these dynamics unfold, the restructuring of state-owned enterprises has also gained momentumOn the same day as Lingdian's announcement, numerous listed companies under China North Industries Group, including Changan Automobile and Great Wall Military Industry, declared that they received notifications from Norinco regarding potential restructuring plans involving collaborations with other state-owned enterprisesSimilarly, Dongfeng Motor Corporation's subsidiaries, Dongfeng Shares and Dongfeng Technology, shared announcements about potential restructuring with other state-owned groups.

This consolidation among central state-owned enterprises comes at a time when more enterprises like China National Nuclear Corporation have recently disclosed major asset reorganization initiatives, illustrating a focused approach toward industry specialization and enhanced collaborative synergyGuoyuan Securities has identified these actions as crucial drivers of the current "merger wave," highlighting the important role that state-owned enterprises play as precursors in facilitating broader economic transformations

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For local state-owned enterprises, engaging in M&A can quicken their process of industry integration and enhance the rate of asset securitization, serving as a pivotal mechanism for driving local industrial transformation and fostering new productive forces.

Encouragingly, intensifying efforts to push forward restructuring and integration is also on the agenda for China's central enterprises looking ahead to 2025, marking it as a key task.

Another aspect of this evolving landscape is the noticeable progress being achieved within the brokerage industryOn February 10, Guolian Securities announced that its A-share equity name would change to “Guolian Minsheng” starting February 14, while Guotai Junan revealed its plans to acquire Haitong Securities through a stock-for-stock transaction, simultaneously indicating a move to raise extra capitalFurthermore, Zhejiang Merchants Securities completed the transfer of shares of Guodu Securities, signaling substantial advancement in the consolidation efforts of the brokerage sector.

In this ongoing integration, brokerage firms are recognizing the potential for complementary advantages, leading to a situation where the total benefits of combined efforts exceed the sum of individual contributionsA prime illustration of this potential is highlighted with Guolian Securities’ plan to acquire a substantial 99.26% stake in Minsheng Securities, a deal heralded as the first project to receive formal approval under the implementation of the new “National Nine Articles” policy guidelinesIt is a definitive symbol of the industry's consolidation efforts.

Market analysts are optimistic that with the ongoing release of policy incentives and the further refinement of the market ecosystem, continuous activity in M&A within the brokerage domain is on the horizonHuang Jing, a non-bank analyst from Guokai Securities, forecasts that by 2025, the industry will continue to experience dynamic M&A activity

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