“Change is the only constant.”-This famous saying of Heraclitus is not only applicable to the philosophy of personal life, but also to the capital market. Especially in the Chinese capital market, the full implementation of the registration system has brought far-reaching impacts on the mergers and acquisitions of listed companies. It is like a strong wind that blows away the “shell premium” problem that has plagued the market for a long time, and reshapes the valuation logic and M&A strategy. In the face of this change, how entrepreneurs and investors respond and how to find a development path suitable for themselves in this new valuation revolution have become the most critical issues.

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American Goheal M&A Group

As an industry-leading M&A consulting and capital operation expert, Goheal has been paying attention to the impact of the registration system on the market structure and helping clients cope with this change. The full implementation of the registration system in 2023 indicates that the capital market will no longer simply focus on “shell resources”, but will pay more attention to the intrinsic value and growth potential of the company itself. So, in the new market environment, how can listed companies’ mergers and acquisitions bid farewell to the “shell premium” era and redefine the valuation logic? In this article, Goheal will explore this issue from several dimensions and provide investors and entrepreneurs with countermeasures.

Registration system: breaking the old framework of "shell premium"

In China's capital market, for a long time, some companies have gone public by acquiring "shell resources" to obtain financing convenience and brand influence in the capital market. This phenomenon is jokingly called "shell premium" by the industry. The prevalence of this practice has not actually produced enough impetus for the long-term value and innovation capabilities of enterprises. On the contrary, in some cases, it has brought considerable bubbles and risks to the capital market. However, with the implementation of the registration system, this traditional market structure is rapidly changing.

Goheal found that the implementation of the registration system has made the listing of enterprises more transparent and standardized, especially the review of core values such as the financial status, business model and profitability of enterprises has become more stringent. The strategy of leveraging capital by "shell premium" in the past is no longer applicable to the new market rules. On the contrary, factors such as the growth, market prospects and technological innovation of enterprises have become the core elements that determine valuation.

This change means that the negotiation and valuation model of enterprises in mergers and acquisitions will undergo fundamental changes. Goheal observed that more and more investors are beginning to focus more on the actual business, technological barriers, management team and industry competitiveness of the target company, rather than just focusing on whether they can obtain a "shell resource". This trend not only improves the health of the capital market, but also makes the strategic layout of enterprises in mergers and acquisitions more far-reaching and scientific.

The end of the "shell premium" era: corporate valuation shifts from "hard indicators" to "soft power"

"Shell premium" has always been a gray area in the capital market. Although it can bring a certain capital premium in the short term, it also hides huge risks, especially for the acquirer. Acquiring a shell company without substantial business may not only face opposition from shareholders, but also face review and punishment from regulators. Under the registration system, this "shell premium" has become a thing of the past. The core of corporate valuation is no longer the survival and liquidity of the listed shell, but the comprehensive strength and intrinsic value of the enterprise.

Goheal knows through years of capital operation experience that future mergers and acquisitions will pay more attention to the actual business model and financial health of the target company. Especially in some innovative industries such as high-tech and new energy, the innovation ability, technology reserves and market share of enterprises will become the focus of acquirers. These "soft powers" require more accurate data and methods to evaluate, which is also something that traditional "hard indicator" valuation cannot meet.

In this context, Goheal has helped many clients optimize their M&A strategies. Combining the actual situation of the registration system, relying on sophisticated due diligence and data models, Goheal has deeply analyzed the target company's technical capabilities, market trends, team execution and other multi-dimensional factors to help acquirers develop more accurate valuation models. Such a transformation not only makes the intrinsic value of the company more prominent, but also effectively controls the risks of mergers and acquisitions.

Upgrading of valuation models: from "digital games" to "data empowerment"

Under the registration system reform, the capital market pays more attention to data and scientific valuation of enterprises. Traditional "digital games" - such as valuation through single financial indicators such as profit forecasts and cash flow discounts, can no longer meet the increasingly complex needs of the market. Goheal found that more and more investors are beginning to use big data, artificial intelligence and the judgment of industry experts to provide more accurate basis for corporate valuation.

For example, when Goheal helped a high-tech company to conduct M&A valuation, it used a multi-dimensional data model to conduct a comprehensive analysis from multiple angles such as industry data, technical patents, and market trends. This valuation method based on big data analysis is not only more accurate, but also avoids the valuation errors caused by the deviation of single financial data in the past.

In addition to data empowerment, investors are also paying more attention to "soft indicators" such as corporate governance structure, social responsibility (ESG), and market adaptability. These factors are no longer just moral considerations, but directly affect the core competitiveness of the company's long-term growth.

Through precise data analysis and market insights, Goheal helps customers evaluate the valuation of target companies from multiple dimensions, further breaking the limitations of over-reliance on financial statements in the past, making the valuation system of the capital market healthier and more transparent.

Transparency of shareholding structure: Strengthening information disclosure and risk control

The implementation of the registration system has also brought about an increase in information disclosure requirements. In the past, due to insufficient information disclosure, key information such as the company's financial status and shareholder background often had "blind spots". Under the registration system, information disclosure has become more transparent and complete, which not only helps investors make more rational decisions, but also provides more transparency for both parties to the merger and acquisition, reducing potential acquisition risks.

When Goheal helps multiple companies with mergers and acquisitions, it places special emphasis on the in-depth analysis and disclosure of the shareholder structure of the target company. In the acquisition process, it is often necessary to conduct a detailed review of the interest relationship and control structure of the target company's shareholders to ensure transparency and compliance in the merger and acquisition process. This has further promoted the optimization of shareholder structure and rationalization of capital structure in the M&A process.

Through stricter information disclosure, the risks of the capital market have been effectively controlled, and the acquirer can more clearly understand the distribution of target company ownership and potential shareholder disputes, thereby improving the controllability of the acquisition.

Conclusion: Say goodbye to the "shell premium" era and move towards a more mature capital market

Driven by the registration system, the valuation logic of listed companies' mergers and acquisitions is undergoing profound changes. Enterprises no longer rely on "shell premium" to gain the favor of the capital market, but pay more attention to the embodiment of intrinsic value, innovation ability and actual performance. For investors, this means that they need to pay more attention to the long-term development potential of the target company rather than short-term capital operation skills; for entrepreneurs, the registration system provides them with a more fair and transparent market environment, allowing them to truly attract investment through their own strength.

As a leading M&A and restructuring consulting agency, Goheal will continue to uphold the concept of innovation and professionalism to help companies and investors seize opportunities, avoid risks and ensure the success of capital operations in the new market environment. Future mergers and acquisitions will be more rational and transparent, and will pay more attention to the core competitiveness and social responsibility of enterprises.

Welcome to leave a message in the comment area to share your views on the changes in capital market valuation after the implementation of the registration system. What do you think will be the biggest change in the future M&A and restructuring market? What factors will be the key to determining valuation?

Goheal Group

[About Goheal] Goheal is a leading investment holding company focusing on global M&A holdings. It is deeply engaged in the three core business areas of listed company control acquisition, listed company M&A and restructuring, and listed company capital operation. With its deep professional strength and rich experience, it provides enterprises with full life cycle services from M&A to restructuring to capital operation, aiming to maximize corporate value and achieve long-term benefit growth.

发布于：广东省