(Yicai) Aug. 8 -- Chinese investors are shifting focus to mergers and acquisitions as well as corporate restructuring as a better way of getting a return on their investment amid a prolonged downturn in initial public offerings on the mainland stock markets. And companies that have tried and failed to go public are also considering M&As as an alternative to being listed.

“Our securities firm has been focused on mergers, acquisitions and restructuring since the beginning of the year,” said a senior executive of the company. “The emphasis is no longer on looking for well qualified companies that plan to go public.”

“The venture capital company I work for is in talks with a number of firms over potential M&As and is also planning to set up buyout funds, so as to better get more opportunities in the M&As and restructuring markets,” a company insider said. “It is getting harder for firms to go public, and some choose instead to merge or be acquired.”

Around 122 listed companies disclosed details about major restructuring programs in the first seven months, almost double the number in the same period last year, according to data from information platform Wind. Forty-five of these were revealing such information for the first time, two-and-a-half times the number a year ago.

Wisdomont Capital will help the companies in which it has invested and which are eligible to go public to list as soon as possible, Yu Yue, partner at the Shanghai-based private equity firm, told Yicai. But if they are not suited to go public, then it will help them to be acquired by another company.

It is becoming easier for private equity and venture capital funds to successfully withdraw from projects through M&As, said Tian Huafeng, president of Shanghai Jinpu Intelligent Technology Investment Management. However, most of these M&As are vertical or horizontal integration of companies in the same industry. Cross-disciplinary M&As are less common.

“There will always be demand for M&As in the field of core technologies, regardless of whether IPO regulations are tightened or not,” said Tian. “Many latecomers, which sometimes boast unique technological achievements but hold a relatively small market share, have to become targets of M&As because leading companies in their segments are already listed on the Shanghai Stock Exchange’s Nasdaq-style Star Market.”

The consolidation rate of many parts of China’s manufacturing sector is still quite low which gives leading companies in their respective fields plenty of motivation and room to increase their market share and improve competitiveness through M&As and restructuring, Tian added.

In the future, companies that are unable to go public or are of ordinary quality are very likely to end up being merged or acquired, Yu said. This means that there is plenty of room for China’s M&A and restructuring markets to grow.

Editors: Tang Shihua, Kim Taylor