Domestic M&A transactions in China are governed by laws such as the Company Law and the Anti-Monopoly Law, and administrative regulations such as the Provisions on the Review of Concentrations of Undertakings and the Provisions on the Standards for the Declaration of Concentrations of Undertakings by the State Council. For M&A involving publicly traded companies, relevant regulations include the Securities Law, the Measures for the Administration of the Acquisition of Publicly Traded Companies, the Measures for the Administration of Major Reorganizations of Publicly Traded Companies, and the Measures for the Administration of Information Disclosure by Publicly Traded Companies. Foreign-funded M&A are subject to the Foreign Investment Law, the Measures for the Administration of Overseas Investments by Enterprises, and the Measures for the Administration of Strategic Investments in Publicly Traded Companies by Foreign Investors. In cases involving state-owned assets, the Enterprise State-Owned Assets Law and the Measures for the Supervision and Administration of the Transaction of Enterprise State-Owned Assets must be followed.

In addition, from the end of 2024 to 2025, Shanghai, Beijing, Shenzhen, Anhui, and other regions successively introduced special support policies for M&A and reorganizations, such as Shanghai’s Action Plan for Supporting the Mergers, Acquisitions, and Reorganizations of Listed Companies (2025–2027) (the “M&A Twelve Measures”), which sets forth the goal of “completing a number of representative M&A cases in key industries, cultivating around 10 internationally competitive listed companies in key sectors such as integrated circuits, biomedicine, and new materials, and achieving RMB 300 billion in M&A transaction volume by 2027”; Beijing’s Several Measures on Further Supporting Mergers, Acquisitions, and Reorganizations of Listed Companies to Enhance Quality (the “M&A 19 Measures”), which encourages “enhancing industrial integration through M&A and encouraging more listed companies with growth potential to focus on their core businesses and leverage their role as industry chain leaders”; and Shenzhen’s *Action Plan for Promoting High-Quality Development of Mergers, Acquisitions, and Reorganizations (2025–2027)*, which states that “by the end of 2027, the quality of listed companies in the region will be significantly improved, with the total market capitalization of domestic and overseas listed companies exceeding RMB 20 trillion, and 20 companies with a market capitalization of RMB 100 billion will be cultivated. The M&A market will grow in both volume and quality, with over 200 M&A projects completed and a total transaction value exceeding RMB 100 billion,” forming a coordinated policy support system at both the central and local levels.

Key regulatory authorities of M&A transactions include：

• the State Administration for Market Regulation (SAMR) is in charge of antitrust reviews and the approval of merger filings.
• China Securities Regulatory Commission (CSRC) oversees publicly traded company mergers and acquisitions and examines the compliance of information disclosure.
• National Development and Reform Commission (NDRC) conducts national security reviews in foreign – funded mergers and acquisitions.
• Ministry of Commerce (MOFCOM) is responsible for the approval of foreign – funded mergers and acquisitions, especially those involving industries on the negative list.
• State-owned Assets Supervision and Administration Commission (SASAC) regulates SOE mergers and acquisitions, and approves asset evaluation, transaction pricing, and property rights transfer procedures.

In addition, for certain specific industries, industry-specific regulatory approvals may also be required. For example, in the cultural and media sector, approvals from the Publicity Department of the Communist Party of China and its local counterparts are required.

(1) The M&A market has shown a significant recovery in activity, with transaction volumes continuing to grow. According to statistics from PwC, the total disclosed value of mergers and acquisitions by Chinese enterprises in 2025 exceeded USD 400 billion, representing a substantial year-on-year increase of 47%.

(2) There has been a significant increase in the number of M&A deals in the hard technology sector. According to PwC statistics, in 2025, approximately 60% of M&A and reorganization targets were concentrated in hard technology industries such as semiconductors, artificial intelligence, new energy, high-end manufacturing, fashion consumption, biomedicine, and new materials. Among these, targets related to new-generation information technologies such as AI, the Industrial Internet, and semiconductors accounted for a high proportion of M&A transactions that year. According to statistics, in 2025, acquirers in Shanghai were most active in industries such as electronics, basic chemicals, biomedicine, computer technology, and machinery equipment.

(3) M&A has become a significant exit route for PE/VC. As IPO reviews continue to tighten, the exit channels for private equity funds are converging with those of mature capital markets. In 2025, the proportion of exits through M&A surpassed that of IPOs for the first time, becoming the primary exit channel for PE/VC.

(4) Cross-border M&A has risen significantly, and private enterprises have become the main force in overseas expansion. In 2025, outbound M&A by Mainland Chinese enterprises showed a continuous upward trend. M&A activities by manufacturing enterprises in Southeast Asia continued to grow, while Europe and the United States also remained preferred destinations for Chinese enterprises’ overseas investments.

(5) Current M&A transactions have shifted from “pure capital-level cooperation” to a model that combines capital with business integration. For example, the acquisition of Tasty by SEB (Shaoxing) in which Wu Dong’s lawyer team participated was no longer a simple equity acquisition but simultaneously achieved deep business cooperation in upstream and downstream supply chains and customer resources. Similarly, The Paper’s investment and acquisition of Qimao Culture, handled by Lawyer Wu Dong’s team, was not only a typical strategic investment at the capital level but also a full-dimensional business synergy in content, channels, and users.

(1) Artificial Intelligence and the Digital Economy: With the development of large AI large models in recent years, sub-sectors such as the AI and digital economy industry, computing power infrastructure, and intelligent solutions have become M&A hotspots. Beyond industrial chain integration, a hallmark feature has been the acquisition of controlling stakes in listed companies by technology unicorns. Typical cases include: in July 2025, Zhiyuan Robotics acquired Shanghai Waiwei New Materials; in March 2026, Tungee acquired Zhenai Meijia. Both utilized a model combining “private placement agreement transfer + voting rights waiver + partial tender offer” to secure listed platforms, paving the way for subsequent industrial integration.

(2) Semiconductors and High-End Manufacturing: STAR Market companies have become the main type of transaction, with all 36 major asset restructuring transactions in 2025 being industrial acquisitions. Leading companies such as Semiconductor Manufacturing International Corporation (SMIC), Hua Hong Company, and National Silicon Industry Group completed industrial chain integration acquisitions. In 2025, the acquisition of Xinlian Yuezhou by United Nova Technology became the first case following the issuance of the “Six M&A Measures” where shares were issued to acquire unprofitable technology assets, marking a significant increase in regulatory tolerance towards M&A involving hard technology enterprises.

(3) Biopharmaceuticals and Medical Health: In the innovative drug sector, in July 2025, Sino Biopharmaceutical Limited acquired a 95.09% stake in LaNova Medicines for USD 951 million, gaining its core pipelines of bispecific antibodies and ADCs. This is one of the largest M&A cases in China’s innovative drug industry. Simultaneously, the divestiture of operations in China by multinational pharmaceutical companies has continued to accelerate. In October and December 2025, German pharmaceutical giant Bayer AG agreed to sell its antibiotic drug Avelox (moxifloxacin)-related business and assets to HSG; in December 2025, Bristol-Myers Squibb sold a 60% stake in Sino-American Shanghai Squibb Pharmaceuticals, Ltd., along with several drugs manufactured and sold exclusively in the Mainland China market. These transactions have all created M&A opportunities for domestic pharmaceutical companies.

(4) Industry M&A led by local state-owned capital has increased: In 2025, local state-owned capital became a significant participant in the M&A market, transitioning comprehensively from traditional “bailout and risk mitigation” to “industrial empowerment,” creating regional industrial integration platforms by acquiring controlling stakes in listed companies. Anhui state-owned capital facilitated controlling stake transactions for nine listed companies in 2025, with a total transaction consideration exceeding RMB 9.1 billion, covering sectors such as semiconductors, automotive components, and new materials. Hubei state-owned capital, Guangzhou state-owned capital, and Hefei state-owned capital also took successive actions, investing in regional industries such as defense, new energy, and public safety. In January 2026, Zhejiang Venture Capital Group, a state-owned enterprise in Zhejiang, led a RMB 90 million investment in the Series A round of Zhangxue Motorcycle. Zhangxue Motorcycle won the Portuguese round of the World Superbike Championship (WSBK) on March 29, 2026, reaching the pinnacle of the world and attracting widespread attention in the Chinese media.

(5) In addition to state-owned capital-led M&A, joint ventures established by local state-owned capital and private enterprises are also increasing. For example, in 2025, Lawyer Wu Dong represented the Shanghai Yangtze River Delta Innovation and Technology Research Institute in its investment in Chongqing Ansibo Company, with both parties forming a joint venture for subsequent R&D in the cell industry. Another example is Lawyer Wu Dong’s representation of the Beicai Town People’s Government of Pudong New Area, Shanghai, and Shanghai Xiehe Education Group in their joint venture to establish a school, which is also a typical case of cooperation between local state-owned capital and private enterprises.

(6) Non-performing asset acquisitions led by AMCs have also become a new area of activity. Different from conventional M&A transactions, against the backdrop of economic downturn, institutions represented by AMCs (financial asset management companies) and local distressed asset management companies are extensively undertaking non-performing asset acquisitions and distressed asset revitalization M&A projects. These projects often focus on high-quality real estate assets at depressed valuations, core assets of distressed real estate enterprises, and project companies. During the economic downturn cycle, this aligns with the national macro-policy direction of “ensuring project delivery, mitigating risks, and revitalizing existing assets,” while also offering significant value restoration potential. For example, the Shanghai Baohua project handled by Wu Dong’s lawyer on behalf of China Great Wall Asset Management, one of China’s four major AMCs, and recent real estate distressed asset M&A projects proactively pursued by CITIC Financial Asset Management for cooperation, are typical examples under this trend.

(7) M&A activity in the fast-moving consumer goods (FMCG) and retail sectors of multinational companies in China has been particularly active. A common feature is that an increasing number of well-known consumer goods and retail brands are transferring equity stakes in their China subsidiaries to local private equity funds and investment institutions. For example, in 2025, Starbucks sold a 60% controlling stake in its core China retail business to Boyu Capital, marking the first time the coffee giant relinquished operational control in its largest overseas market. Similarly, Restaurant Brands International (RBI) transferred an 83% stake in its Burger King China business to local investment institution CPE Yuanfeng, retaining only a minority stake. Haagen-Dazs, under General Mills, is seeking buyers for its over 400 ice cream stores in China due to sustained declines in store traffic. French sporting goods retailer Decathlon is also in the process of selling a 30% stake in its China subsidiary, with a valuation of approximately RMB 10 billion. In another example, Ingka Centres, which is part of the same group as IKEA, partnered with Gaocapital in December 2025 to acquire assets of three core Livat shopping centers in Beijing, Wuhan, and Wuxi, with a valuation of up to RMB 16 billion. Following the transaction, Ingka continues to manage the brand, while asset ownership and long-term holding responsibilities have been transferred to Gaocapital. On February 2, 2026, seven IKEA stores officially ceased operations.

(1) Policy orientation is a core driver of M&A activities. In 2024, the CSRC’s “Eight Measures for Deepening the Reform of the Science and Technology Innovation Board to Serve Scientific and Technological Innovation and the Development of New Productivity” and the “Six Measures for Deepening the Reform of the Publicly Traded Company M&A and Restructuring Market”(Six M&A Measures) significantly enlivened the market through simplified approval, relaxed valuation restrictions, and encouragement of cross – border M&A. In 2025, supporting policies such as the revised Administrative Measures for Major Asset Restructurings of Listed Companies and the Administrative Measures for M&A Loans of Commercial Banks issued by the National Financial Regulatory Administration in December 2025 further strengthened policy support and facilitated the development of M&A transactions. In 2026, the NDRC will collaborate with the Ministry of Finance to establish a national-level M&A fund, while Shanghai is accelerating the formation of a RMB 50 billion market-oriented M&A fund matrix.

(2) M&A demand driven by industrial upgrading and technological transformation. On the one hand, in strategic fields such as semiconductors, artificial intelligence, new energy, high-end manufacturing, and biomedicine, the demand for enterprises to achieve supply chain strengthening and gap-filling, acquire core technologies, and overcome critical bottlenecks through M&A will continue to be released, with both horizontal and vertical integration along the industrial chain becoming mainstream in the market. On the other hand, the need for capacity reduction and increased concentration in traditional industries is becoming increasingly urgent; as industry competition shifts from incremental expansion to stock optimization, M&A will serve as a core tool for enterprises in traditional industries to transform, upgrade, and optimize their business structures, which is expected to generate more large-scale consolidation transactions within these industries. Furthermore, in the context of changing global geopolitical dynamics, the demand for Chinese enterprises to acquire overseas technologies, brands, and market resources through cross-border M&A will also continue to grow, driving a further rebound in cross-border M&A.

(3) Private equity exit pressure is driving transaction demand. PwC data shows that as of 2025, China’s private equity fund stock – scale was nearly 20 trillion yuan. A significant number of projects invested in from 2019 to 2021 have entered their exit window. Concurrently, IPO reviews remain stringent, and the capacity of the IPO exit channel is limited. Consequently, M&A exits have become the largest exit channel for PE/VC. Over the next two years, private funds will continue to facilitate exits of their portfolio companies through industrial M&A and reverse takeovers by listed companies, serving as a core source of supply for M&A targets. At the same time, the valuation recovery in the A-share and Hong Kong capital markets provides a more reasonable pricing basis for M&A transactions and enhances the willingness and capability of listed companies to use share-based payments for M&A. RMB funds, industrial capital, and insurance funds collectively constitute abundant domestic capital supply, providing ample funding support for M&A transactions and further activating market vitality.

The main acquisition means for publicly traded companies are as follows:

(1) Tender Offer: A common method where the acquirer makes an offer to all target – company shareholders to purchase shares under specified terms. It can be a full tender offer or a partial tender offer.

(2) Agreement – Based Acquisition: The acquirer and the shareholders of the target company sign an agreement to transfer shares. For example, a strategic investor signs an agreement with a major shareholder to acquire a portion of their shares and become a major shareholder. The advantage is flexibility, allowing both parties to negotiate details based on their needs.

(3) Indirect Acquisition: The acquirer gains indirect control by acquiring the shares of the target – company’s shareholders or through other means. Its advantage is avoiding some direct – acquisition restrictions, like share – lockup periods. However, it has a complex structure involving multiple legal relationships and regulatory requirements.

If the target company is a publicly traded company, relatively more information is publicly available. Pursuant to the Securities Law and relevant accounting standards, publicly traded companies must regularly disclose financial data, including balance sheets, income statements, and cash flow statements, which can be accessed through the official websites of stock exchanges and designated information disclosure media. For non-publicly traded companies, there is less publicly available information that ordinary members of the public can access. Basic details such as registered shareholders, capital contributions, and key personnel can be found on the National Enterprise Credit Information Publicity System. However, lawyers may obtain more information by requesting the corporate registration files from the relevant authorities. During due diligence, the scope of information disclosure by the target company depends on the mutual agreement between the parties and legal requirements. Publicly traded companies have the obligation to provide necessary information to potential acquirers, provided that such disclosure complies with applicable laws, regulations, and stock exchange rules. For non-publicly traded companies, the obligation to disclose information is based on the agreement between the parties, and information should be provided in accordance with the acquirer’s reasonable requests, including information relating to finance, business operations, debts and claims, material assets, intellectual property, environmental protection, tax status, and details regarding government tax rebates, awards, and subsidies.

The depth of due diligence varies with deal size, industry, and target – company specifics. Generally, core legal aspects are thoroughly checked, such as: Reviewing original business registration docs to confirm the target’s history, equity structure, investments, branches, and legal status (no revocation, deregistration, or irregularities). Checking real estate registries for asset mortgages or seizures and verifying intellectual property. Scrutinizing major contracts with high values and strict breach liabilities. Also, ensure the business model is legal and all required administrative permits, licenses, and qualifications are in place to avoid illegal – operation risks. For specialized industries, tailored due diligence is needed. For example, for tech firms, assess patent ownership and any potential disputes over service – related inventions. It is worth noting that at the end of 2025, Meta acquired Manus for over USD 2 billion in cash, triggering a review by MOFCOM and NDRC regarding “indirect technology transfer.” When foreign investors acquire Chinese enterprises involving technology export/outbound transfer, special attention should be paid to whether such transactions will trigger Chinese government review. In the case of cross-border M&A transactions, it is necessary to engage local counsel in the target’s jurisdiction to conduct due diligence, focusing on matters such as foreign investment access, national security reviews, antitrust regulations, tax compliance, cross-border data flows, localization requirements for labor and employment, environmental compliance, and foreign exchange controls. For popular investment regions such as Europe and Southeast Asia, additional verification of the latest changes in local industrial policies is required.

The shareholders’ meeting, board of directors, and managers are all internal institutions of the company, and decisions are made separately according to the importance of business matters, especially in accordance with the articles of association. For major matters like M&A transactions involving company mergers, divisions, dissolutions, and liquidations, a special resolution of the shareholders’ meeting is usually required, passed by shareholders holding more than two – thirds of the voting rights. The board of directors decides on general matters such as business plans and investment programs. The manager has the right to decide on daily management matters like small – amount contract signing and personnel allocation.

Directors have obligations of loyalty and diligence. They must focus on the company’s interests, avoid conflicts of interest, and not use their positions for personal gain. Under the Company Law, directors must fulfill duties of loyalty (such as prohibiting self – dealing and usurpation of corporate opportunities) and diligence (making reasonable decisions and evaluating acquisition plans). In M&A transactions, directors must conduct due diligence on the acquirer’s qualifications and offer reasonableness, and may engage professional institutions for assessment and advice to shareholders. Controlling shareholders must exercise their rights and fulfill obligations in accordance with relevant laws, regulations, and the articles of association, obtaining shareholder meeting authorization for M&A – related matters such as asset sales and equity disposals, and not abusing control to harm the company or other shareholders.

Employee rights protection is a key legal issue in M&A transactions. For state – owned or state – capital – controlled enterprises, M&A matters must consider the opinions of trade unions and employees. If employee resettlement is involved, a resettlement plan must be formulated and passed by the Employees’ Congress. For non – state – owned enterprises, in asset acquisitions or mergers and divisions, the original labor contract remains valid and is inherited by the surviving or newly – established company. In equity acquisition models, there is no change of the entity of labor contract, and the acquirer must continue to perform the existing labor contract. If M&A leads to “significant changes in objective circumstances” such as business line withdrawal or department dissolution, the enterprise can terminate the labor contract but must pay economic compensation. Company creditors, as stakeholders, must be notified in the event of company mergers or divisions. Creditors can demand debt repayment or provision of guarantees but have no direct veto power.

Conditional clauses are common in M&A transactions but vary in acceptance depending on transaction type, market conditions, and negotiation positions. In domestic M&A, common conditions include antitrust approval and SOE regulatory approval. In cross-border transactions, the application of conditional provisions is broader, additional conditions such as foreign exchange registration and passing the target country’s security review (e.g., the US CFIUS) are common. In certain special scenarios, such as M&A transactions involving listed companies, in addition to statutory conditions, the inclusion of commercial closing conditions must also comply with regulatory requirements. Conditions designed to circumvent regulations or harm the interests of minority shareholders are not permitted. All conditions precedent to closing must be fully disclosed in information disclosure documents. In private equity/venture capital M&A transactions, strict milestone-based conditions are often set regarding performance commitments, retention of core teams, and renewal of key customer contracts.

(1) Execution of Exclusive Agreement or Exclusivity Clause: The acquisition intent letter or framework agreement shall explicitly stipulate that, within a specified period, the target company is restricted to negotiations solely with the acquiring party and is prohibited from engaging with any other potential buyers. For instance, it can be agreed that the target company shall not initiate any form of contact or consultation regarding the acquisition with a third party over the next three months, under penalty of breach of contract. Meanwhile, considering the transaction’s complexity and anticipated negotiation duration, the exclusivity period should be reasonably set, such as 6 to 12 months, to prevent undue disruption to the target company’s normal operations or financing.

(2) Deposit or Guarantee Payment: Upon signing the intent letter, the acquirer pays a deposit to the target company to demonstrate acquisition sincerity. This enhances the target company’s commitment to the transaction and restrains its actions. The handling of the deposit post – due diligence should be specified, whether it be interest – free refund to the acquirer or conversion into part of the acquisition payment upon formal agreement signing.

(1) Break-up Fee: If the Seller prematurely terminates the proposed transaction due to specific events, it must pay the Buyer/Acquirer a certain amount, typically 3%-5% of the transaction value.

(2) Earn-out Arrangement (also known as “Valuation Adjustment Mechanism”): In some growth industries, the acquirer may agree with the Seller to link the purchase price to the target company’s future performance. For example, a 3-5 year performance-based earn-out period may be set, during which if the target company fails to meet the expected performance, the original shareholders or the target company must compensate for the difference. This reduces the initial payment cost and incentivizes the Seller to assist the target company in achieving value growth after closing. Additionally, it is more common to stipulate a buy-back clause, such as if the target company does not go public within 5 years or encounters a material breach, the acquirer has the right to require the original shareholders or the target company to repurchase the equity at an agreed price. The price is usually “investment principal + fixed proportion of returns”.

(3) Conditional Closing and Payment Clauses: The transaction consideration is divided into an initial payment and several milestone payments. The acquirer can link the payment of the purchase price to conditions such as performance commitments and regulatory approvals. For example, 50% is paid upfront, and the remaining amount is paid within one year after closing based on the audit results.

(4) Material Adverse Change Clause: Allows the Buyer to exit the transaction if the target company experiences a significant negative event. However, it is important to clearly define the definition of a material adverse change, such as a revenue decline of over 20% in the current year.

(1) Cash Payment: The Buyer directly pays the Seller in cash for the target company’s equity or assets. This is the simplest and most direct form of consideration, and one of the most common in China’s domestic M&A transactions, especially in small and medium-sized deals. Cash payment can quickly close the transaction but places high financial demands on the acquirer. In December 2025, the Administrative Measures for M&A Loans of Commercial Banks was formally implemented, raising the upper limit for the proportion of control-type M&A loans to transaction consideration from 60% to 70%, extending the maximum term from 7 years to 10 years, and introducing equity-type M&A loans. These changes significantly enhanced the acquirer’s capability and flexibility in cash payments, further expanding the application scenarios for cash payment.

(2) Stock Payment: The Buyer exchanges its shares for the Seller’s equity, making the Seller its shareholder. In recent years, stock payment has become popular in capital market M&A, especially in strategic acquisitions, as it enables resource integration and long-term cooperation. For example, Disney acquired 21st Century Fox’s assets in 2019 through a $71.3 billion stock deal. The Administrative Measures for Major Asset Restructurings of Listed Companies, revised in 2025, comprehensively optimized the share-based payment mechanism: it introduced a “one-time registration, issuance in installments” mechanism, extending the validity period of registration to up to 48 months; it implemented a “longer investment period, shorter lock-up period” reverse-linkage arrangement for private funds, substantially reducing transaction counterparties’ concerns about accepting share-based payments and significantly increasing the market adoption rate of stock payment.

(3) Hybrid Payment: This combines cash and stock to balance the Buyer’s financial pressure with the Seller’s liquidity needs. A typical example is in September 2025, when Huahai Chengke acquired Hengsuo Huawei, which served as a benchmark case following the release of the “Six M&A Measures,” utilizing a diversified mix of payment tools including shares, convertible bonds, and cash.

(4) Asset Swap: The Buyer offers non-cash assets as consideration. For instance, the typical example is that Songfa Co. used asset swap when acquiring Hengli Heavy Industry in December 2024.

For publicly traded company acquisitions:

• First disclosure trigger: The acquirer must submit a written report to the CSRC and the stock exchange and announce it when reaching or exceeding 5% of the target company’s issued shares, and notify the target company.
• Ongoing disclosure after changes:

(1) Every 5% increment/decrement: If the acquirer’s shareholding increases or decreases by 5% increments (e.g., 10%, 15%), disclosure is required.

(2) Special disclosure for every 1% change: After holding 5% of the shares, the investor must notify the publicly traded company and issue a prompt announcement within the next trading day for every 1% increase or decrease.

(3) Exception: If the acquirer’s agreement acquisition results in shareholding reaching or exceeding 30%, a full or partial tender offer must be made to other shareholders unless exempt.

For non-publicly traded companies, there is no legal compulsion. As for publicly traded companies, they must disclose the signing of the LOI and basic deal terms (e.g., target assets, transaction method) upon securities regulatory requirements at the initial LOI – signing stage. After substantive negotiations and reaching preliminary terms, the publicly traded company must convene a board meeting to deliberate and disclose the transaction draft, including key terms like valuation, payment method, and performance commitments. Board approval usually means the deal must then go to the shareholders’ meeting for deliberation. If there are related – party transactions or material asset restructurings, separate disclosure is needed. For deals involving state – owned assets, anti – monopoly issues, or cross – border elements, the company must declare to the SASAC, SAMR, or MOFCOM after internal procedures, during which the transaction info might be disclosed in the approval process. Upon deal completion, the publicly traded company must announce the final transaction result, asset/equity transfer, and next steps. If the deal falls through, the reasons and impacts must also be disclosed.

There is no unified legal time limit for due diligence and negotiations, which depend on mutual agreements and project complexity. In practice, due diligence for small – and medium – sized projects typically takes 1 – 2 months. For large or complex projects, such as those involving state – owned assets or cross – border transactions, it may extend to 3 – 6 months or longer. For publicly traded company M&A, due diligence may take over six months to meet CSRC and exchange requirements, and longer if there are complex historical issues or financial data adjustments.

In M&A transactions, there’s no fixed maximum duration between announcing and closing a deal. The length depends on various factors, including transaction complexity, regulatory approval progress, and negotiations between parties. It is determined based on the agreed – upon conditions and actual performance.

For non – publicly traded companies, the equity transfer price is flexibly determined through negotiation based on asset status, profitability, etc. In publicly traded company tender offers, the offer price for the same type of stock must not be lower than the highest price paid by the acquirer for that stock in the six months before the tender offer announcement.

In state – owned equity transfers: For non – publicly traded companies, the transfer price is generally not less than the assessed value filed and approved.For publicly traded companies, the transfer price is not less than the higher of the 30 – day average closing price before the announcement and the net asset value per share.

According to the Company Law, a joint – stock company cannot provide gifts, loans, guarantees, or other financial assistance to others for acquiring its or its parent’s shares, except for employee stock ownership plans. For the company’s benefit, upon a shareholders’ meeting resolution, or a board resolution authorized by the articles of association or shareholders’ meeting, the company may provide financial assistance for others to acquire its or its parent’s shares. The total financial assistance can’t exceed 10% of the issued share capital. A board resolution requires a two – thirds majority of all directors.

There is no mandatory legal provision on governing law in M&A transactions in China. Generally, the principle favorable to the acquirer is adopted and determined in combination with the transaction entity and the location of the subject matter. For domestic deals, Chinese law typically applies; for cross – border ones, parties often agree on the law, such as that of the target’s location, the dominant party’s location, or a mutually agreed third country. However, the transaction will still be subject to the target country’s or region’s laws. Especially when the target is in China, local Market Supervision Bureaus may require the target to provide Chinese – law – based templates for the share transfer agreement, shareholders’ resolutions, and articles of association. Otherwise, the equity transaction’s closing and implementation (i.e., shareholder change registration) might not be registered or filed by the local bureau.

(1) The acquirer shall submit a Short – Form Rights Change Report when its shareholding in a publicly traded company reaches or changes by 5%, covering basic acquirer information and shareholding purposes. If the acquirer’s stake exceeds 20%, or it becomes the largest shareholder or actual controller, a Detailed Rights Change Report must be submitted, which should include more detailed acquisition information.

(2) In a tender offer, the acquirer must first release an abstract of the offer report, disclosing key details like its identity and the offer price. Then, it should publish the full offer report, setting out the acquisition plan in full. Moreover, it needs to hire financial advisors and lawyers to give professional opinions on the company’s board report and the Detailed Shareholding Change Report.

(3) In an acquisition by agreement, the acquirer should first release an abstract of the acquisition report, followed by the full report, along with professional opinions from financial advisors and lawyers.

(4) If the acquirer fails to disclose the above information in a timely manner as required, the CSRC may issue warnings, impose fines, or ban the violator from the market. Serious violations may lead to the transaction’s revocation.

(1) Execution of the Share Transfer Agreement and Internal Procedures: The share transfer agreement should be executed, and internal company procedures, such as shareholders’ resolutions and the right of first refusal for other shareholders, should be fulfilled.

(2) Change of Ownership Registration: Submit an application for equity change registration to the local Market Supervision and Administration Bureau of the target company, and record the transferee’s information in the company’s internal register of shareholders. For public M&A transactions, transfer registration procedures should also be carried out with the local branch of China Securities Depository and Clearing Corporation Limited, and documents such as the rights change report should be disclosed to the public.

(3) Tax Declaration and Filing: Update tax information. The acquirer must pay stamp duty, and the transferor must pay individual or corporate income tax in addition to stamp duty (exempt if eligible).

Hostile takeovers are not a mainstream phenomenon in China’s capital market; they represent a tool of contest within the capital market sphere. From the view of the development history of China’s capital market, hostile takeovers have always been a niche type of transaction . In the past decade, there have been a small number of hostile takeover cases in China’s capital market. Typically in 2015, the Baoneng Group tried to gain control of Vanke by buying shares on the secondary market, sparking wide – spread attention but ending in failure. In 2024, Hisense Network Energy’s successful acquisition of Kolin Electric was a rare recent success.

Directors of the target company must act in accordance with their fiduciary and due diligence obligations to the company. In practice, to counter hostile takeovers, directors generally may, within the rights and powers prescribed by law and the articles of association, promote the adoption of two categories of measures by the company: preventive and responsive.

Preventive measures typically include promoting amendments to the articles of association to introduce provisions such as “supermajority clauses” and “staggered board clauses” to increase the difficulty for an acquirer to obtain control of the company.

Notably, after the revision of the Company Law in 2023 has introduced the authorized capital system, which allows the board of directors of a joint-stock company to issue shares within the authorized scope without separate approval from the shareholders’ meeting. This enables the board to freely issue a certain number of shares to implement a Shareholder Rights Plan, or “poison pill,” to counteract hostile takeovers.

In general, buyers aren’t forced to make mandatory offers for target companies, except in special cases or as agreed upon by shareholders. In mergers and acquisitions of limited liability companies, buyers usually have no such obligation unless exceptions like tag – along rights are stipulated in the articles of association or shareholder agreements. In contrast, for publicly traded company M&A, China’s Securities Law and relevant regulations establish a mandatory tender offer system. This system aims to protect minority shareholders and maintain market fairness and stability. Specifically, when an acquirer’s shareholding reaches 30% and they continue to increase their stake, or when indirect acquisition leads to a change in control, or when a partial offer’s predetermined ratio exceeds 30%, a full tender offer to all shareholders is mandatory. The offer price must not be lower than the highest trading price in the past six months, unless exempted. Exemptions include state – owned asset transfers, special equity changes, or other scenarios approved in advance by the CSRC.

Under PRC laws, minority shareholders mainly enjoy the following rights:

(1) Right to Information: This includes the right to inspect and copy the company’s articles of association, shareholder register, records of shareholders’ meetings, board resolutions, supervisory board resolutions, financial and accounting reports, and to review the company’s accounting books and vouchers. Shareholders may also engage lawyers or accountants to assist in exercising these rights.

(2) Right to Submit Proposals: A shareholder, or shareholders collectively holding more than 1% of the shares of a joint – stock company, may submit a temporary proposal in writing to the board of directors ten days before the shareholders’ meeting.

(3) Right to Interrogate: Shareholders may question the company’s management, directors, supervisors, and senior executives about the company’s operations.

(4) Right of Dissenting Shareholders to Request Share Repurchase: In cases of company merger, division, transfer of major assets, etc., dissenting shareholders may request the company to repurchase their shares. Additionally, if controlling shareholders abuse their rights, causing serious harm to the company or other shareholders, those other shareholders also have the right to request repurchase.

(5) Right to Petition for Company Dissolution: Where serious difficulties arise in the company’s operations and management, and its continued existence would cause substantial loss to the interests of the shareholders, and such issues cannot be resolved through other means, shareholders holding 10% or more of the voting rights of all shareholders of the company have the right to file a lawsuit with the people’s court, petitioning for the dissolution of the company, thereby safeguarding their own legitimate rights and interests.

Generally, compulsorily acquisitions are prohibited. However, under China’s Securities Law, when an acquirer, acting alone or in concert with others through agreements or other arrangements, reaches 30% of the issued voting shares of a publicly traded company, they must lawfully make a tender offer to all shareholders for all or part of the shares if they continue the acquisition, except for circumstances exempted by the CSRC regulations mentioned in Question 26.

In addition to the mandatory offer requirement for major shareholders, China’s Company Law also grants minority shareholders the right to request share repurchase at a reasonable price under specific circumstances. This includes the right to request repurchase for dissenting shareholders and in cases where the controlling shareholder abuses their power to harm the company or other shareholders. Moreover, Chinese law permits shareholders to agree on special rights such as drag – along and tag – along rights, which can be regarded as mechanisms for the compulsory acquisition of minority shares.