Recently, the merger of Guolian Securities and Guojin Securities has caused an uproar in the securities industry. Under the policy encouragement, industry M & An is also a shortcut to build an aircraft carrier-class securities firm. Under the demonstration of the merger of the two securities firms, more and more people in the industry think that the merger and integration of securities firms is the trend of the times.

The policy encourages the building of aircraft carrier-level securities firms.

Mergers and acquisitions of securities firms to meet opportunities

While rumors of the merger of CITIC Securities and CITIC Construction Investment Securities are still buzzing, on September 20, Guolian Securities announced that it would acquire Guojin Securities, and the drama of brokerage industry consolidation finally began. Some people in the industry even believe that the trend of mergers and acquisitions of securities firms is surging.

A person in charge of a brokerage in eastern China said that the merger of the two brokerages is an active cooperation under the background of supervision and encouraging the securities industry to become bigger and stronger, which is good for the securities industry and is conducive to the development of the industry to present a new pattern.

The merger and integration of securities industry in China has experienced the transformation process from policy M & A to market-oriented M & A. in recent years, with the gradual enhancement of industry Matthew effect, the evolution of competition pattern and the change of regulatory policy, the merger and integration of the securities industry is facing a historic opportunity.

Wei Tao, a non-bank analyst at Huaxi Securities, said that in recent years, there are three main reasons for inter-industry mergers and acquisitions of securities companies: first, supervision encourages mergers and acquisitions of securities firms; second, securities firms hope to seize the window before the great changes in the industry pattern and cross the threshold of large-scale comprehensive securities firms through mergers and acquisitions. Third, since 2018, the policies to improve the corporate governance system such as the qualification of shareholders of financial institutions, as well as the strengthening of the supervision of financial holding companies, make some private capital willing to withdraw from securities firms.

In November 2019, the CSRC clearly proposed to actively promote the building of aircraft carrier-level head securities companies, and M & An is one of the important ways to build aircraft carrier-level securities firms. In July 2020, the relevant departments of the CSRC issued a circular to the dispatched offices to support the securities fund industry to implement organizational management innovation, one of which is to encourage industry institutions to achieve market-oriented mergers and acquisitions in accordance with the law. to achieve rapid development in the aspects of capital strength, management level, information technology and so on.

According to an insider of a medium-sized securities firm in Beijing, there are some problems in China's securities industry, such as serious homogenization and excessive license plates. The homogenization of the business model makes the market share of some small and medium-sized securities firms continue to shrink under the impact of the market. Market-oriented mergers and acquisitions will not only help securities firms to make up for their business shortcomings, but also help to promote the concentration of the industry, and to a certain extent, it is also expected to improve the pattern of homogeneous competition in the industry.

According to the above-mentioned people, when the US securities industry faces the impact of downward commissions, US head securities firms work together to expand economies of scale and reduce costs. "compared with international securities firms, China's securities market started relatively late, such as Goldman Sachs, Morgan Stanley and other international first-class investment banks have not been produced. High-quality M & An integration can make the advantages of various securities firms complement each other, which is a shortcut to build a first-class securities firm, "said the above-mentioned person.

Another person in charge of a medium-sized securities firm believes that from the external environment, with the accelerated pace of opening up of the financial industry to the outside world, international securities firms have poured in one after another, and wholly foreign-owned securities firms are about to appear in the industry. Under the "catfish effect" of foreign securities firms, the securities industry will become bigger and stronger through mergers and acquisitions, which is expected to become a trend.

Demonstration effect caused by M & A

The general trend of the integration of the securities industry

The merger of Guolian Securities and Guojin Securities not only set off a big wave in the capital market, but also triggered the deep thinking of various institutions in the securities industry. Some people in the industry believe that the operation mode of the League of Nations stock exchange to absorb and acquire national funds has also given a very great demonstration effect to the market. After the merger of the two medium-sized securities firms, a new 100 billion securities firm was born, which can be regarded as an effective way for securities firms to become bigger and stronger.

An investment banker of a large securities firm in Shenzhen said that the current trend of mergers and acquisitions in the securities industry has not stopped, and the integration of inter-industry mergers and acquisitions includes not only actions such as mergers and acquisitions of small and medium-sized securities firms, but also asset integration between small and medium-sized securities firms. Through mergers and acquisitions, we can give better play to the advantages of integration, help securities companies to achieve cross-regional allocation of resources and enhance competitiveness.

"the consolidation of the securities industry is a general trend, and when there is no high premium in asset prices, it is a more appropriate time to acquire or restructure at this time. In the future, the number of acquisitions between securities companies will only increase, not decrease. " The investment banker said.

Recently, the speculation of brokerage stocks in the secondary market is fierce, especially after the news of the merger and acquisition of Guojin Guolian, many securities companies with the same controlling shareholders have also become the list of market capital speculation. For example, both belong to SASAC's State Investment Capital, Minmetals Capital, China Merchants Securities, Great Wall Securities; China Galaxy, Shen Wanhongyuan, which also belong to the Central Huijin, have become the focus of attention of all parties.

According to the analysis of some brokerage personages, although the merger and acquisition of the securities industry is the general trend, from the point of view of maneuverability, it is too difficult for the two securities firms with different physique and shareholder background to merge, and it is easier to merge two or three securities firms under the same controlling shareholder, which also makes this batch of small and medium-sized securities firms an important target of market funds.

Wei Tao, a non-bank analyst at Huaxi Securities, pointed out that cases of securities acquisitions or mergers will continue to emerge in the future. The merger includes not only the "combination of strong and strong", "strong and weak", but also the huddling between small and medium-sized securities firms. In addition to the integration promoted at the shareholder level, private securities firms may become important merger targets in market-oriented mergers and acquisitions.

While the merger of large securities firms involves more and wider issues, team integration, cultural integration and other problems will bring many challenges to both sides of the merger. At present, no large securities firm has officially announced that it is about to merge. On the morning of September 25, on the investor interactive platform, an investor asked Haitong Securities that the company, Guotai Junan and Oriental Securities are all securities firms under the Shanghai State-owned assets Supervision and Administration Commission, and whether it is possible to integrate in the future. Haitong Securities replied that the company's board of directors did not discuss related matters for the time being.

Get rid of the predicament of anaemic growth

Small and medium-sized securities firms break through through mergers and acquisitions

Recently, the merger and acquisition of Guolian Securities and Guojin Securities triggered a heated discussion in the industry, which exceeded expectations and opened up a huge imagination space for small and medium-sized brokerages to usher in a wave of mergers and acquisitions as a whole.

In the view of people in the industry, the Matthew effect of the current industry has become increasingly prominent, small and medium-sized securities firms are trapped in the plight of weak growth, and M & An is an effective way to make up for the deficiency and form a breakthrough. More brokerage personages judge that mergers and acquisitions between small and medium-sized institutions are also expected to bring integration effects, and the first echelon camp of the securities industry will soon usher in changes.

Small and medium-sized securities firms encounter survival difficulties

Mergers and acquisitions may be the way to break through.

In recent years, while the development of the securities industry has ushered in policy dividends, it is facing multiple adjustments, and the industry pattern is also facing adjustment all the time. A number of small and medium-sized securities firms with insufficient strength and limited resources are undoubtedly being marginalized. At this point, M & An is becoming an effective way for many small and medium-sized securities firms to form a breakthrough.

Insiders of a medium-sized securities firm in Beijing believe that in recent years, the Matthew effect of the brokerage industry has become increasingly prominent, and large securities firms have encroached on a lot of living space of other securities firms; small and medium-sized securities firms can enhance their own capital strength and expand the network of business departments. increase the "bargaining chips" against large securities firms As long as it can solve the problem of team integration and do not let the elite teams of both sides lose, in theory, small and medium-sized securities firms can benefit from the merger.

"'differentiation competition' has been said to be bad in recent years, but there are still not many small and medium-sized securities firms that have found the development path of differentiation. The securities industry is very cruel, the lack of strength, it is difficult to attract talents, it is difficult to build an excellent team. Compared with looking for the illusory path of differentiation, M & An integration is indeed a shortcut for securities firms to make up for their shortcomings. " This is what the above-mentioned person said.

He Nanye, a special researcher at the SUNING Institute of Finance, said that the era of high profits in the securities industry is over, the competition is becoming more and more fierce, the head effect is getting stronger and stronger, all kinds of resources are rapidly concentrated to the head securities firms, and small and medium-sized securities firms are rapidly marginalized. As a result, many securities firms are facing difficulties in making profits and deteriorating asset quality, and shareholders are more willing to sell their shares on their own initiative than before.

The head of a relevant department of a securities firm in Shanghai told reporters that the future competition in the securities industry will enter a higher-quality stage of development. In its view, on the one hand, the financial industry is increasingly open, and on the other hand, the domestic financial market is facing huge development opportunities. Under the access of foreign companies, the securities industry can only be bigger and stronger to resist, and for small and medium-sized securities firms, seeking better development after the merger has also become an optional and good path.

With the gradual rise of the M & A boom, the domestic securities industry is converging with the European and American securities market, large securities firms will occupy the market share, and market competition will become more and more concentrated. In his view, both large, small and medium-sized securities firms are looking for opportunities to further expand their share, and there is development anxiety. For large securities firms, strengthen economies of scale through mergers and acquisitions to make up for competitive disadvantages in some regions or parts of business; for small and medium-sized securities firms, they can obtain more resources through mergers and acquisitions to get rid of the current dilemma of weak growth as soon as possible. " He Nanye said.

Merger and acquisition leads to the effect of Securities Industry Integration

The first echelon camp may usher in a change.

From the point of view of the industry, the merger of Guojin Securities and Guolian Securities is a typical case in which small and medium-sized securities firms are likely to break through mergers and acquisitions. At the same time, the integration effect brought by M & A will help small and medium-sized securities firms to quickly enter the first echelon.

According to Huatai Securities, the net assets of Guojin Securities and Guolian Securities ranked 23rd and 59th respectively in 2019, and the combined net assets will reach 28.4 billion yuan, which is expected to enter the top 20 in the industry. The net profit ranking is 21 and 43 respectively, and the combined net profit is expected to reach 1.8 billion yuan. The integrated Guolian Securities is expected to enter the camp of medium-sized brokerages.

Huatai Securities believes that from an operational point of view, the two regions are highly complementary. Guojin Securities operation is concentrated in Sichuan Province, and 38% of the business department at the end of 19 years is distributed in Sichuan Province. Guolian Securities business is concentrated in Jiangsu Province, and 69% of the business is distributed in Jiangsu Province at the end of 19 years. Guojin Securities has certain advantages in brokerage and investment banking business. Guolian Securities is based on the advantage of external talents and is expected to absorb the inherent advantages of Guojin to further create professional characteristics in the future.

Centering on the absorption and acquisition of national funds by the League of Nations, the relevant person in charge of Guojin Securities replied to a reporter from China Fund News: "in the new stage of China's economic development, the securities industry is also undergoing profound changes. State-owned securities firms and private securities firms are also facing opportunities and challenges for the development of the industry, as well as the urgent need to become bigger and stronger.

"the two companies can complement each other in terms of business philosophy, business development, teamwork, model innovation, incentive mechanism, and social returns, which will help both sides to become stronger and bigger together and enhance their ability to serve the real economy. The two sides jointly make use of their respective professional backgrounds, differentiation advantages, human resources and incentive mechanisms to form a good development trend of you and me, business coordination, efficiency improvement and complementary advantages. " The person in charge of Guojin Securities said.

Wei Tao, a non-bank analyst at Huaxi Securities, said that the senior management team of Guolian Securities once led CITIC Securities to the leading position, and the management team is the most interesting point of Guolian Securities, which deserves continued attention in the future. In terms of business layout, Guolian Securities has advantages in Wuxi, Sunan and the Yangtze River Delta, while Guojin Securities has advantages in Sichuan, and the two can complement each other in terms of network layout. Guojin securities investment banking business capacity is excellent, superimposed Guolian securities location resources advantages, investment banking business is expected to a higher level.

Hu Jiang, a non-bank analyst at AVIC Securities, said that the controlling shareholder of Guolian Securities is local state-owned assets, and the controlling shareholder of Guojin Securities is the "Yongjin system" of private enterprise groups. on the one hand, the merged local state-owned plus private equity structure can fully mobilize all parties' resources. on the other hand, the mechanism will be more flexible and more market-oriented, on the whole, if the two are successfully integrated, it is expected to achieve the effect of one plus one greater than two.

Just last year, Citic Securities's merger and acquisition of Guangzhou Securities sparked a heated debate in the industry. Some brokerage insiders commented: "in accordance with the Citic Securities acquisition plan, Guangzhou Securities will become the main battlefield for Citic to expand its wealth management business in southern China, and its leading securities position will be further consolidated."

Wang Yifeng of Everbright Securities said that strengthening the company's strength through mergers and acquisitions is a way for the industry to transform into a capital intermediary business. Reviewing the four waves of M & An integration in China's securities industry and the growth history of leading securities firms at home and abroad, we can see that through M & An integration, securities firms can expand the location layout, extend the business chain and break through the bottleneck of development.

Citic Securities started from a medium-sized securities firm, seizing the opportunity to gradually lock in the leading position through many mergers and acquisitions. Therefore, it is believed that at the time of the new wave of M & An integration, it is an effective way to break through the tight encirclement and upward promotion or to achieve the rapid enhancement of the overall strength of securities firms. " Wang Yifeng pointed out.

Differences may set up "roadblocks" for mergers and acquisitions of securities firms.

It will take time for business synergies to be brought into full play.

In the past week, the merger of Guojin Securities and Guolian Securities has firmly occupied the "hot search list" of the securities industry, and with the merger of the two brokerages, the expectation of integrated mergers and acquisitions in the securities industry has been greatly raised. Whether there are plans for a merger has also become more questions asked by shareholders on the interactive platform.

However, although M & An in the securities industry is the trend of the times and the direction of supervision, there is still a long way to go from ideal landing to reality, and M & A between securities firms is still faced with some problems to be solved. Some people in the industry have pointed out that the signing of M & An agreement is not the end of M & A, but the beginning of M & A, and the difference may become a major obstacle to M & An of securities firms. After M & A, how to integrate companies with completely different culture, mechanism, organizational structure and business forms also plays a key role in the effect of M & A. it is not easy for M & A to play a synergistic effect.

The difference may become a big obstacle to the merger and acquisition of securities firms.

With the merger of Guojin and Guolian Securities, the integration of the securities industry is expected to be pushed to the most exciting part, a number of brokerages have been "merged by investors" and have been sealed off the trading limit. However, in fact, the merger of the securities industry is ideal, but the ideal landing to reality, there are still some problems that must be faced and solved.

A person in charge of a brokerage in eastern China said that for both large and small and medium-sized brokerages, the merger is a very "nerve-racking" thing, because it involves too much scope.

"as big as the matching at the strategic level of the company, as small as the deployment and running-in of human resources, these are all things that mobilize the whole body, and if any link is not done well, there will be endless troubles," it further said. because of cultural, conceptual discord and even salary changes and other factors, it is not uncommon for the staff team to leave after the merger of the two companies.

Insiders of a medium-sized securities firm in Beijing said that the difference of securities firms is one of the biggest obstacles in the process of mergers and acquisitions, which is mainly reflected in two aspects, one is the diversity of assets, and the other is the complex background of shareholders.

In the view of the above-mentioned people, there are two problems that are easy to be overlooked in the process of M & A. First, it is necessary to retain talents. Usually, the merger of securities firms will cause the adjustment of the departments and ranks of some employees, and if the great upheaval of personnel and team causes dissatisfaction among employees, it will easily lead to brain drain, so securities firms need to pay special attention to the problem of talent retention during the merger. The second is the problem of risk control. Usually, the merger and reorganization of securities firms will put forward higher requirements for the operation and management of securities firms. During the merger period, the internal control system and risk early warning mechanism of securities firms are very prone to risks if there are loopholes in the operation and management.

"the merger of securities firms does not necessarily mean good news. From the point of view of the secondary market, the hype in the market is now more intense. Judging from the historical cases in the past, the cooperation of two different securities firms may also cause internal divisions, many problems will arise in the process of setting up the management of the newly merged company, and all kinds of problems such as organizational structure and assessment mechanism will be redesigned. there will even be a high-speed flow of personnel and the abolition of outlets. If the internal instability is too strong, the performance of securities companies will also be affected, "said one private equity investor familiar with brokerage stocks.

An insider of a large brokerage in eastern China said that mergers and acquisitions by brokerages have never been easy, and there are cases of ineffective mergers and acquisitions. The merger of Shenyin Wanguo and Hongyuan Securities is a classic case. There is a lot of complementarity between the two companies in terms of customers and business, but when the two companies merged around 2015, Shenyin Wanguo's investment banking and asset management business rankings were not dominant, and Hongyuan Securities executives were under investigation. The two companies are facing a certain crisis before the merger, and the running-in of the management of the two companies after the merger is also said to have encountered some problems. In 2018, the market share of Shenwan Hongyuan's brokerage business fell to 4.39%, which is smaller than that of Shenyin Wanguo before the acquisition.

Wei Tao, director of West China Securities Research Institute, pointed out that Citic Securities has established a strong marketing network through mergers and acquisitions, and mergers and acquisitions are also one of the most valuable experiences in the development of Schwab Financial, a leader in the US brokerage and wealth management industry. Schwab Financial enhances its business scale and comprehensive service capability through mergers and acquisitions. However, mergers and acquisitions that are not in line with the company's strategy and difficult to integrate will be a drag on the company's development. The Morgan Stanley Huitian acquisition is a negative example that is not in line with the company's strategy. There are also many integration problems in the merger of Fangzheng Securities and National Securities in China. The process of purchase guidance, M & An and reorganization is not smooth.

There is still a long way to go to bring the synergy into play.

Some people in the industry pointed out that the M & An action of securities firms is only the first step, and there is still a long way to go from the real realization of M & An overlap and deep integration. "the merger of League of Nations and Guojin Securities is like Huachuang Securities's acquisition of some shares in Pacific Securities, Tianfeng Securities and Hengtai Securities, which is still a certain distance from the real M & A, and can only be said to be a transitional or primary stage."

In fact, after M & A, how to integrate companies with completely different culture, mechanism, organizational structure and business forms has also become a common concern, which is also the key factor to determine the effect of M & A. It can be said that there is still a long way to go from the beginning of M & A to the real synergy between the two brokerage businesses.

A person from the securities brokerage department of a medium-sized securities firm said that his company was acquired by a large domestic securities firm two years ago, but the business background and customer base of the two companies are quite different. The latter is positioned to provide consulting services to high net worth customers, emphasizing the allocation of large categories of assets and investment management, while the original company is deeply rooted in small and medium-sized retail investors all over the country. Different customer groups lead to different needs of wealth management, and the business integration of the two sales personnel is relatively low.

Take the wealth management business as an example, large companies put great emphasis on the thinking of asset allocation, which requires very high requirements for investment talents and a relatively high threshold for customers to select. At present, many companies do not quite adapt to the culture of large companies, so it is more difficult to integrate in the early stage. " The above-mentioned brokerage business department said.

Some people in the industry pointed out that, in terms of traditional thinking, the integration between securities firms is aimed at complementary advantages, but different securities firms have different business and regional boundaries, and there are also great differences in talent echelon and organizational culture. it seems easy to supplement each other's short board business, but whether it can really achieve deep business integration actually needs to be called a question mark.

The above-mentioned brokerage investment bankers believe that the current external operating environment is not optimistic, competition is fierce, risks are frequent, and market fluctuations encountered by large-scale securities firms will also be greater. If there are many problems in the companies that come in, it is likely to become an encumbrance to business development before giving full play to synergy.

"of course, we hope to complete a successful merger and acquisition, but it is not an easy task. We can only tread on thin ice, be careful, respect culture, respect employees and respect business, and sort out the common culture and goals. at the same time, we should deeply understand the changing domestic and foreign environment and the competitive pattern of the securities industry in accordance with local conditions, explore a development model in line with the future development trend, and give the employees and business of the acquired company a new development platform and opportunities. In order to improve the probability of success, with regard to Tianfeng Securities's merger and acquisition of Hengtai Securities, Zhai Chenxi, vice president of Tianfeng Securities and co-president of Hengtai Securities, pointed out in his official account in August that the signing of M & An agreements is not the end of M & A. it's the beginning of mergers and acquisitions. In fact, the core of the success of M & An is the connection and understanding of culture, the respect and attention to people, and the familiarity and matching of business.