Chinese listed companies will have more freedom to complete mergers and acquisitions under new guidelines issued last week, reports Caixin, a move seen as a bid to rev up activity in the country’s markets.
According to the China Securities Regulatory Commission, listed companies will be able to use up to 50% of funds raised publicly for acquisition purposes, hopefully granting a boost to operating capital or facilitating loans for further spending.
No more than 25% of the acquisition’s value should come from funds raised in this way, the CSRC added.
This practice was previously restricted in order to deter firms from undertaking speculative deals. Following a ruling made in 2016, companies had to raise capital specifically for an acquisition in order for the transaction to be funded.
Earlier this month the CSRC introduced a new fast-track scheme, speeding up the approval process for small-scale M&A deals. The regulator estimates that around 90% of M&A deals no longer require regulatory approvals.