Pricing issues in listed companies’ M&A, restructuring

Why do listed companies carry out mergers and acquisitions (M&A)? From a macro point of view, M&A and restructuring can effectively realize the rational allocation of market resources, enhance the efficiency of capital market operations, and play a role of “lighter” and “accelerator” in strengthening the national economy and boosting economic development and industry consolidation. On a micro level, M&A of another company to obtain its control by equity transactions on the one hand strengthens the enterprise itself, and on the other expands its market share. Since equity transactions are at the core of M&A and restructuring, the pricing of equity or assets is therefore the top priority.

FORMS OF M&A

Mergers and acquisitions of listed companies, judged from the forms of equity transfer, fall into two categories: the acquisition of shares, and the acquisition of assets.

Share acquisition, that is, the acquisition of all or part of the equity of the shareholders of listed companies, is generally divided into two types: either by buying shares of target shareholders to acquire shares issued by the target company, or the issuing of the acquiring party’s shares to the target company’s shareholders in exchange for the shares of the target company they hold.

In asset acquisitions, the acquisition subject is a company’s assets, and the acquisition, following the principle of market transactions, is a paid consideration. Asset acquisitions usually occur because the acquiring company settles on the quality assets of the business acquired, featuring in the purchase of the company’s assets rather than the equity.