CHINA Law and Practice Contributed by: Bing Zhai, Commerce & Finance Law Offices
2. Overview of Regulatory Field 2.1 Acquiring a Company The Provisions on Merger and Acquisition of Domestic Enterprises by Foreign Investors issued by the Ministry of Commerce (MOFCOM) stipulate three types of acquisition methods: equity acquisition, asset acquisition, and share swap acquisition. • Equity acquisition refers to a foreign inves - tor purchasing the equity of shareholders of a domestic non-foreign-invested enterprise (hereinafter referred to as “domestic com- pany” ) or subscribing to the capital increase of a domestic company, thereby transforming the domestic company into a foreign-invested enterprise. • Asset acquisition refers to a foreign inves - tor establishing a foreign-invested enterprise and, through this enterprise, agreeing to purchase the assets of a domestic enterprise and operate those assets. Alternatively, it may involve a foreign investor agreeing to purchase the assets of a domestic enterprise and using those assets to establish a foreign- invested enterprise to operate them. • Share swap acquisition refers to the act of a shareholder of an overseas company using the equity they hold in the overseas company, or to the overseas company using its newly issued shares, as a means of payment to pur - chase the equity of shareholders of a domes - tic company or to subscribe to the newly issued shares of a domestic company. 2.2 Primary Regulators In China, M&A are regulated by a combination of governmental authorities and regulatory bodies, each overseeing specific aspects of the trans - action process. The primary regulators are as follows.
industries. For instance, leading tech firms are acquiring companies specialising in AI algorithm development and application deployment. Manufacturing Sector: Active M&A for Transformation The manufacturing sector also saw robust M&A activity. In the automotive industry, companies are facing challenges such as declining indus - try cycles, the elimination of outdated capacity and increasing industry concentration. M&A has become a critical tool for resource integration and industrial upgrading. Traditional manufac - turing companies, under pressure to transform and upgrade, are actively using M&A to acquire new technologies, enter new markets and secure resources, thereby improving their competitive - ness. Many manufacturing firms are proactively utilising capital market tools to achieve their strategic goals. Pharmaceutical Sector: Frequent M&A for Innovation The pharmaceutical sector has been highly active in M&A, positioning itself as a key driver of new productive forces and potentially becoming one of the most dynamic and policy-benefiting sectors. For large pharmaceutical companies, acquiring “external innovation” through M&A and licensing is as important as internal R&D. Many companies are using M&A to expand their product lines, enter new therapeutic areas and enhance their R&D capabilities. Driven by fac - tors such as an aging population and increased health awareness, opportunities for M&A in inno - vative drugs and medical devices continue to emerge.
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