In recent years, the merger and acquisition (M&A) wave in the securities brokerage industry has been heating up.

Regulatory authorities have encouraged leading securities firms to grow stronger through M&A and restructuring, in order to enhance the overall competitiveness of the industry and optimize resource allocation.

In 2023 and 2024, the securities industry has seen several eye-catching M&A cases, such as "Ping An + Founder," "Pacific + Hua Chuang," "Guo Lian + Min Sheng," "Zhe Shang + Guo Du," "West + Guo Rong," and "Guoxin + Wanhe," among others.

These M&A cases involve not only large securities firms but also the integration between medium-sized firms.

With policy encouragement and an improved market environment, the securities industry has begun to accelerate M&A and restructuring, forming a trend of increasing industry concentration.

Especially in 2024, the M&A wave in the securities industry has further accelerated.

For example, Guotai Junan Securities and Haitong Securities both announced a suspension of trading on the evening of September 5th, planning a major asset restructuring, and the stocks were suspended from trading on September 6th; the "Guo Lian + Min Sheng" M&A case received approval from the Jiangsu Provincial Government State-owned Assets Supervision and Administration Commission on September 3rd, 2024; Guoxin Securities announced on August 22nd, 2024, the intention to acquire Wanhe Securities.

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The "big fish eat small fish" M&A wave in the securities industry is accelerating, and this phenomenon is particularly evident in 2024.

Recently, the sixth M&A case of the year in the securities industry has emerged, with Guoxin Securities, an old-line securities firm under the Shenzhen State-owned Assets Supervision and Administration Commission, possibly merging with Wanhe Securities.

On August 22nd, Guoxin Securities issued a "Suspension of Trading Announcement on Planning to Issue Shares to Purchase Assets," stating the intention to purchase 53.0892% of the shares of Wanhe Securities held by Shenzhen Capital Operation Group Co., Ltd. through the issuance of shares.

From the perspective of company size and financial data, this M&A can be described as "big fish eat small fish."

According to the 2023 annual report data, Guoxin Securities' net assets exceeded 100 billion yuan, about 20 times that of Wanhe Securities, and the net income from investment banking business was about 17 times that of Wanhe Securities.

Public information shows that the predecessor of Guoxin Securities was Shenzhen Guotou Securities, established in 1994 by Shenzhen International Trust and Investment Company and China International Enterprise Cooperation Company.

According to its semi-annual report for 2024, as of the end of June 2024, Guoxin Securities had a total asset of 465.681 billion yuan, a total liability of 353.062 billion yuan, and a total of 239 business outlets in 117 cities nationwide.

In terms of performance, Guoxin Securities ranks at the forefront.

The 2023 annual report shows that Guoxin Securities' total annual revenue was 17.317 billion yuan, ranking 12th in the industry; the net profit was 6.427 billion yuan, ranking 9th in the industry.

In the first half of 2024, Guoxin Securities achieved a total operating income of 7.757 billion yuan, with a net profit attributable to the parent company of 3.139 billion yuan.

It is worth noting that in the first half of 2024, when equity financing experienced a phased cooling, Guoxin Securities completed 4.83 stock underwriting projects, ranking 11th in the industry; the raised funds were 4.922 billion yuan, ranking 8th in the industry.

Wanhe Securities, on the other hand, is a small securities firm.

Public information shows that Wanhe Securities was established in 2002, jointly funded by Shenzhen Financial Financial Service Center, Haikou Financial Office Supplies Service Company, and Chengdu Caisheng Asset Management Center.

The 2023 annual report of Wanhe Securities disclosed on the official website of the Securities Industry Association shows that as of the end of 2023, the company's total net assets were 5.447 billion yuan, with 25 securities business departments in 18 provinces and cities nationwide.

According to the preliminary ranking statistics of the Securities Industry Association on 145 securities companies in 2023, Wanhe Securities ranked 85th in total assets, 84th in net assets, 84th in net capital, 100th in business income, and 99th in net profit in 2023.

State-owned capital acts as an "accelerator" Currently, the securities industry has entered a white-hot stage of M&A and restructuring.

In this wave of securities firm M&A, state-owned capital may be playing the role of an "accelerator."

For example, the actual controllers of Guoxin Securities and Wanhe Securities are both the Shenzhen Municipal Government State-owned Assets Supervision and Administration Commission.

The M&A of Guoxin Securities by Wanhe Securities is also seen by the market as an internal asset integration led by Shenzhen state-owned capital; Guotai Junan and Haitong Securities officially started the merger, and both securities firms belong to Shanghai state-owned capital; the "Guo Lian + Min Sheng" M&A case is inseparable from the active promotion of the Jiangsu Provincial Government State-owned Assets Supervision and Administration Commission.

Specifically, the merger of Guotai Junan and Haitong Securities is the first case of the merger and restructuring of leading securities firms since the implementation of the new "Nine Articles," and it is also the largest scale of A+H dual-market absorption and merger, and the largest integration case of A+H listed securities firms in the history of China's capital market, involving multiple business licenses and multiple domestic and foreign listed subsidiaries, which is a major innovative item without precedent.

Public information shows that the actual controller of Guotai Junan Securities is Shanghai International Group Co., Ltd., and the largest shareholder of Haitong Securities is Shanghai Guosheng (Group) Co., Ltd. After equity penetration, both securities firms belong to Shanghai state-owned capital.

The merger of Guotai Junan and Haitong Securities will give birth to an aircraft carrier-level securities company.

According to the 2023 data, the total assets and net assets attributable to the parent company of the new institution after the merger will reach 1.68 trillion yuan and 330 billion yuan, respectively, both ranking first in the industry.

In the "Guo Lian + Min Sheng" M&A case, the active promotion of the controlling shareholder of Guo Lian Securities, Wuxi Municipal Government State-owned Assets Supervision and Administration Commission, also played a role in accelerating the merger process.

Information shows that Min Sheng Securities, established in 1986, is also an "old-line securities firm" and was previously a "puzzle piece" in the "Pan-sea system" financial map, with its actual controller being the actual controller of Pan-sea Holdings, Lu Zhiqiang.

With the equity auction, Lu Zhiqiang also lost control of Min Sheng Securities.

In terms of progress, on March 15, 2023, the controlling shareholder of Guo Lian Securities, Guo Lian Group, won the 3.47 billion shares of Min Sheng Securities held by Pan-sea Holdings through judicial auction, accounting for 30.3% of the total share capital, with a transaction price of about 9.1 billion yuan.

On April 25 of the same year, Guo Lian Securities issued a suspension of trading announcement on planning major asset restructuring, stating that the company plans to issue shares to acquire 95.48% of the shares of Min Sheng Securities held by Guo Lian Group and 45 other parties.

This indicates that the reorganization and integration of the two securities firms have entered the substantive stage.

On the evening of August 8, 2024, Guo Lian Securities issued a reorganization draft, planning to acquire 99.26% of the shares of Min Sheng Securities through the issuance of shares, and raise supporting funds not exceeding 2 billion yuan, issuing no more than 250 million A shares.

The total transaction price reached 29.492 billion yuan.

On September 3rd, the Jiangsu Provincial Government State-owned Assets Supervision and Administration Commission approved this transaction.

On September 4th, Guo Lian Securities held a shareholders' meeting to review and pass the major asset restructuring matters related to the acquisition of 99.26% of the shares of Min Sheng Securities and the raising of supporting funds.

The progress of this M&A case from the release of the reorganization draft to the approval of the Jiangsu Provincial Government State-owned Assets Supervision and Administration Commission, and then to the approval of the shareholders' meeting, is eye-catching.

According to regulatory provisions, Guo Lian Securities must submit the declaration materials to the Shanghai Stock Exchange within three working days after making the shareholders' meeting resolution, and the integration work of both parties is about to officially enter the subsequent regulatory review stage.

Industry insiders predict that with the completion of regulatory review, this M&A case is expected to become an important catalytic event for the financial supply-side reform of the securities industry.

The M&A and restructuring boom is coming back Looking back over the past 30 years, China's securities industry has experienced four rounds of M&A waves.

Public information shows that the first was from 1995 to 2002, the "separation of business operations" M&A wave; the second was from 2004 to 2006, the "comprehensive management" M&A wave; the third was from 2008 to 2010, the "one participation and one control" M&A wave; the fourth was from 2012 to now, the "market-oriented" M&A wave.

Since last year, the regulatory level has repeatedly mentioned and encouraged securities firms to optimize and strengthen themselves through M&A and restructuring, and to enhance core competitiveness.

For example, in November 2023, the China Securities Regulatory Commission (CSRC) proposed to support leading securities companies to optimize and strengthen themselves through business innovation, group operations, M&A and restructuring, and to create first-class investment banks, playing an important role in serving the real economy and maintaining financial stability as a ballast stone.

On April 12th this year, the new "Nine Articles" of the capital market also clearly pointed out that it supports leading institutions to enhance core competitiveness through M&A and restructuring, organizational innovation, and encourages small and medium-sized institutions to develop differently and operate with characteristics.

The CSRC has also introduced relevant supporting policy documents, clarifying the goal of "forming 2 to 3 investment banks and investment institutions with international competitiveness and market leadership by 2035."

Under the boost of policies, the market expectation of the securities industry M&A is also continuously heating up.

In addition to the "Guotai Junan + Haitong," "Guo Lian + Min Sheng," and "Guoxin + Wanhe" M&A cases, many other mergers are also in progress.

For example, the first securities firm M&A case of 2024 - Zhejiang Merchants Securities' acquisition of Guodu Securities, Western Securities plans to acquire Guorong Securities, and the M&A and restructuring of securities firms such as Hua Chuang Securities and Pacific Securities are also being promoted, as well as the news of Ping An Group's intention to acquire Founder Securities has also attracted much attention.

Taking the merger case of Pacific Securities and Hua Chuang Securities as an example, at the end of last year, the change of the controlling shareholder of Pacific Securities was feedback by the CSRC.

Hua Chuang Yunxin stated that in January 2024, after the company's shareholders' meeting was reviewed and passed, Hua Chuang Securities will go to the court to get the execution ruling and handle the equity transfer procedures after the CSRC approves the shareholder qualification.

"Zhejiang Merchants + Guodu" is the first securities firm M&A case of 2024.

On May 27th this year, Zhejiang Merchants Securities announced that the company signed a property transaction contract with Guohua Energy, transferring its holdings of 449 million shares of Guodu Securities, corresponding to 7.69% of the shares, with a transaction price of 1.009 billion yuan.

At the same time, the M&A and restructuring activities of other securities firms are also being promoted.

At the performance explanation meeting held on March 29th, the chairman of Founder Securities, Shi Hua, responded to the integration progress with Ping An Securities, stating that the work is being promoted according to the rhythm; in June this year, Western Securities announced in the announcement that it is planning to acquire Guorong Securities; in July this year, Jinlong Shares issued the "Motion on the Formal Public Listing Transfer of 20% Shares of Dongguan Securities," and the company's board of directors agreed to formally publicize the listing transfer of the 300 million shares of Dongguan Securities (accounting for 20% of the total share capital of Dongguan Securities) held by the company through the Shanghai United Property Exchange, with a listing base price of 2.272 billion yuan.Currently, policies support securities firms to grow and strengthen through mergers and acquisitions (M&A) and restructuring.

The M&A and restructuring in the securities industry are gaining momentum.

It can be anticipated that in the future, there will be more market-oriented M&A and restructuring in the securities industry.