Technology M&A 2026 Comparisons

Over the past 12–18 months, China’s overall M&A market has remained relatively moderate compared to pre-pandemic peaks, but the technology sector continues to be one of the few areas maintaining high activity levels. Market feedback indicates that in 2024, M&A transaction volumes were still in a period of adjustment, but certain large-scale or strategic deals drove a relative rebound in transaction values. Technology and healthcare remain among the more active sectors in domestic and cross-border M&A.

Compared to the global technology M&A market, China remains relatively limited in terms of total transaction volume and scale. However, since the end of 2024, sectors such as semiconductors, artificial intelligence, robotics, and enterprise software – collectively known as “hard tech” – have shown signs of recovery.

In terms of transaction structures adopted by Chinese buyers, domestic technology M&A activity is significantly higher than outbound M&A. Constrained by tightening foreign investment screening, capital controls, and geopolitical factors, Chinese investors are cautious about controlling acquisitions in sensitive technology areas in Europe and the USA, preferring minority equity investments, joint venture arrangements, or overseas greenfield investments. Meanwhile, in fields like power batteries, new energy, photovoltaics, energy storage, and key components, Chinese technology enterprises have achieved internationalisation expansion with “quasi-M&A” effects by establishing production facilities in Europe, the Middle East, and Southeast Asia, serving as an important supplement to traditional acquisitions.

Over the past year, China’s technology M&A market has exhibited several structural trends:

• Shift From “Consumer Internet” to “Hard Tech” and Industrial Technology: Market focus has gradually moved from platform-based internet and online entertainment to semiconductors, industrial software, automation equipment, new energy, advanced manufacturing, and certain aerospace and defence-related technologies. These transactions are often closely aligned with industrial upgrades, technological autonomy, and supply chain stability, imposing higher requirements on transaction compliance and policy alignment.
• Increased Participation of Government-Guided Funds and Policy-Oriented Capital: Industrial guidance funds at central and local levels have gained growing influence in semiconductors, artificial intelligence, quantum technology, and other areas, typically participating through LP investments or direct investments. In some projects, such funds impose explicit requirements on listing paths, industrial landing arrangements, and the location of core assets, substantially impacting transaction structure design and exit arrangements.
• Data Compliance and Regulatory Factors Becoming Key Considerations in Valuation and Transaction Structures: With the ongoing implementation of systems under the Personal Information Protection Law, Data Security Law, and Cybersecurity Law, whether the target company is designated as a critical information infrastructure operator, whether it involves “important data” processing, and the compliance of cross-border data flows have become core issues in due diligence and valuation analysis. In practice, many M&A transactions use specific structural arrangements to isolate risks related to sensitive data and associated businesses.
• IPO Paths Tending to Concentrate on Domestic and Hong Kong Markets: Influenced by overseas listing filing systems, audit regulatory requirements, and Sino-US regulatory co-ordination, technology enterprises are more inclined toward listing schemes on the STAR Market, ChiNext, Beijing Stock Exchange, and Hong Kong Stock Exchange via A+H or H-share models. Compared to before, the application of the “VIE + US stock” model has significantly contracted.
• Antitrust and Platform Regulation Entering a Normalised Phase: While antitrust enforcement authorities have refined operator concentration filing rules, they have strengthened attention to internet and platform-type transactions that do not meet filing thresholds but may have competitive impacts. In this context, large platform enterprises acquiring small and medium-sized technology companies need to assess antitrust and related regulatory risks earlier and reserve corresponding compliance response space in transaction documents.

For technology start-up projects primarily focused on the Chinese market, founders typically choose to establish a limited liability company in China as the main operating entity. In recent years, company business registration and related supporting processes have become highly digitised, generally taking one to two weeks to complete in first-tier metropoles (including name pre-approval, business licence, seal engraving, and tax registration handled synchronously). Except for regulated or licensed sectors, current laws no longer uniformly set minimum registered capital standards,  generally requiring shareholders to complete subscribed capital contributions within a period not exceeding five years; the registered capital scale is mainly determined by shareholders based on business planning and financing arrangements.

When planning for future overseas listings or expecting to introduce substantial USD funds, some projects adopt an overseas “red-chip structure”, establishing offshore holding companies in the Cayman Islands or BVI, then holding domestic wholly foreign-owned enterprises (WFOE) and VIE structure entities through intermediate holding companies in Hong Kong, Singapore, etc. With the implementation of overseas listing filing systems and the gradual refinement of data security and national security review requirements, whether to build a red-chip or VIE structure has become an issue that needs comprehensive assessment early in the project, combining business attributes, compliance costs, and exit expectations, typically requiring early co-ordination with underwriters and legal advisers.

The vast majority of technology start-ups adopt the limited liability company form. This form has a simple governance structure, low establishment costs, facilitates introducing new shareholders and signing shareholder agreements, and is easy to embed employee equity incentive terms. Under the current legal framework, foreign-invested enterprises uniformly apply company governance rules under the Company Law, and in practice, limited liability companies are mostly used as the main operating carriers.

When a company plans to publicly issue stocks and list domestically, it usually needs to convert the limited liability company overall into a joint stock limited company. This conversion typically occurs in the pre-IPO stage, rather than in angel or Series A financing stages. Partnership enterprises in China are generally more used to carry investment funds (VC/PE) themselves, rather than directly as daily operating entities for technology enterprises.

For projects adopting red-chip structures, the common practice is to establish Cayman exempted companies overseas as the group’s top-level shareholding carriers, while domestically using WFOE and VIE protocol control entities to undertake restricted industry licences and businesses. With gradual adjustments to foreign access policies in some value-added telecommunications and related fields, “whether it is necessary to build a VIE structure” has become a key assessment issue in the structure design stage in practice.

The funding sources for seed and angel rounds of Chinese technology start-ups are diverse, mainly including:

• individual angel investors (successful entrepreneurs or executives from large companies);
• professional angel funds, accelerators, and incubators;
• corporate venture capital (CVC) from large internet platforms and industrial groups;
• government industrial guidance funds at various levels and angel mother funds; and
• family offices and “friends and family” rounds.

Government guidance funds play an increasingly important role in hard tech and specialised, refined, differentiated, and innovative sectors, with many localities requiring invested enterprises to locate core R&D and production locally or contribute a certain proportion to local taxes and employment.

Early investments are typically implemented through capital increases and share expansions, supplemented by shareholder agreements and revised articles of association. In some projects, convertible debts or convertible equity arrangements are also combined to accommodate valuation uncertainties and flexibility for subsequent financing or structural adjustments.

In Series A and subsequent financing stages, the main funding sources for technology enterprises are typically led by professional VC, growth equity investment funds, and government mega-funds, with CVC and industrial capital often entering as co-leads or strategic investors. RMB funds remain highly accessible for projects primarily focused on the Chinese market, while USD funds maintain certain activity in cutting-edge technology and cross-border business model projects. However, in regulated areas involving sensitive data, mapping, military-civilian integration, fintech, etc, investment decisions are usually more cautious.

Government-backed investment institutions continue to play important roles in strategic industries such as semiconductors, new energy, and aerospace, with participation methods including indirect allocation as fund LPs and direct investments with specific requirements in corporate governance or exit arrangements. Meanwhile, when foreign funds invest in domestic enterprises in industries on the negative list, they often need to achieve compliance through minority equity, contractual arrangements, or multi-layer shareholding structures, while also paying attention to foreign investment, data compliance, and related security review requirements.

China’s venture capital transaction documentations have formed relatively mature market conventions, but there remain certain differences in file structures and key terms between onshore RMB transactions and offshore USD transactions.

Onshore projects typically use Chinese-language capital increase and share subscription agreements, shareholder agreements, and revised articles of association, with term designs absorbing elements from NVCA templates such as liquidation preferences, anti-dilution, pre-emptive rights, co-sale rights, drag-along rights, information rights, and founder vesting arrangements, while making localised adjustments in combination with the Company Law and judicial practice.

Offshore projects mostly adopt shareholder agreements and preferred share terms governed by Anglo-American legal systems, supplemented by domestic equity pledges or VIE agreements, and stipulating arbitrations in Hong Kong, Mainland PRC, or Singapore as dispute resolution mechanisms.

In practice, certain terms directly copied from overseas templates (such as mandatory redemptions, excessively high default liabilities, or overprotective arrangements) may face uncertainties in validity or enforceability under the Chinese legal framework. To balance investment protection with Company Law principles, the market often uses phased arrangements, liquidation preference mechanisms, convertible instruments, or designs co-ordinated with employee incentives to structurally adjust related risks.

As companies expand in scale and enter relatively mature financing stages, especially in Series B and beyond, some technology companies conduct systematic adjustments to existing equity structures and corporate architectures. Common paths in practice include:

• Domestic limited liability company → establishing overseas holding companies and completing equity swaps → converting domestic operating entities into wholly foreign-owned enterprises or Sino-foreign joint ventures and introducing VIE arrangements; or,
• maintaining a pure domestic structure and converting the limited liability company overall into a joint stock limited company before proposed listing.

The Company Law has made new provisions on registered capital payments, equity repurchases, responsibilities of directors, supervisors, and senior executives, etc, coupled with the implementation of overseas listing filing systems and data security review systems, requiring enterprises to clarify approximate exit paths at Series B/C: whether to pursue a domestic IPO, Hong Kong listing, or introduce strategic or PE exits. The later the adjustment of corporate form and domicile, the more complex the issues involving taxes, foreign exchange, state-owned assets, employee shareholdings, and technology contributions, with higher costs and uncertainties.

For technology companies that have achieved a certain business scale and demonstrated sustained growth capabilities, IPO remains one of the most symbolic exit paths. Under the registration-based frameworks of the STAR Market, ChiNext, and Beijing Stock Exchange, some enterprises that have not yet achieved full profitability but possess “hard tech attributes” and high R&D investment ratios may still qualify for market entry. At the same time, influenced by volatility in market valuations, review timelines, and regulatory scrutiny, investors and issuers have become more cautious and pragmatic in exit planning. In practice, trade sales or equity transfers are increasingly viewed as important parallel exit options to IPO, rather than mere alternatives.

Operationally, a common approach is to adopt a “dual-track” arrangement: advancing listing counselling and application preparations on one hand, while maintaining communication with potential strategic or financial investors on the other, to enhance exit path flexibility.

For technology companies with relatively limited scale, focused on niche fields, or with profitability not yet fully realised, achieving exits through acquisitions by large platform companies, industrial groups, or platforms controlled by private equity funds remains a common path. Some companies also choose to sell core businesses or assets to central or local state-owned enterprises or industry leaders, while retaining partial light-asset or service-oriented businesses as a foundation for subsequent development.

The choice of listing venue is influenced by multiple factors such as business focus, revenue currency, data security attributes, future M&A planning, and geopolitics. Overall trends are:

• Domestic A-share Markets (Shanghai Stock Exchange STAR Market, Shenzhen Stock Exchange ChiNext, Beijing Stock Exchange, and Main Boards): These are suitable for technology enterprises oriented toward the Chinese market, aligned with national strategies, with certain R&D investments and profit scales. Under the registration system, emphasis is more on information disclosure rather than administrative approvals, offering higher inclusivity for enterprises that are not yet fully profitable but have advanced technology and innovative models.
• Hong Kong Stock Exchange: This is applicable to technology companies adopting red-chip structures, with substantial overseas revenues, or hoping to access international investors, and also the preferred venue for many original US-listed Chinese concept stocks to return or secondary list.
• US or Other Overseas Exchanges: Under new filing systems, audit regulations, and Sino-US geopolitical dynamics, the number of new US tech IPOs has significantly decreased, with only a few companies with highly globalised businesses and controllable risks in data and security still considering them.

In industries such as new energy, photovoltaics, and energy storage, some enterprises attempt A-share + GDR (Swiss Exchange, London Stock Exchange) or A+H multi-venue listing combinations to accommodate RMB and foreign currency investor demands. Such structures, while broadening investor bases, also impose higher requirements on cross-market regulatory co-ordination and information disclosure consistency.

The choice of listing venue largely determines the securities regulatory frameworks and transaction rules applicable to the company’s future M&A activities. For companies listed in mainland China, their M&A activities must comply with the Securities Law, Measures for the Administration of Acquisitions of Listed Companies, and relevant exchange business rules, with explicit requirements on information disclosure, tender offer acquisition prices, mandatory tender offer triggering conditions, and major asset reorganisation procedures. Under the current system, relevant rules provide relatively strict procedural protections for minority shareholder rights but have not established statutory “squeeze-out” mechanisms similar to those in some Anglo-American legal systems.

If a company is only listed on overseas markets (eg, Hong Kong or the USA), its equity-level M&A transactions typically primarily apply the securities laws and acquisition rules of the listing venue and company registration place, while Chinese laws focus on domestic assets, operating licences, employee arrangements, and data compliance matters. In such cases, operator concentration antitrust reviews, foreign investment security reviews, data security reviews, and approvals from competent industry authorities may still substantially impact transaction feasibility, structures, and completion timelines.

For technology companies already listed overseas but with main businesses and core assets concentrated in China, if planning overall sales or reorganisations through privatisation delisting, red-chip returns, or asset reorganisations in the future, they usually need to co-ordinate overseas securities regulatory requirements (eg, H-share or ADR-related rules) and Chinese regulatory authorities’ compliance requirements for red-chip returns, backdoor listings, and cross-border data flows. Such transactions are often more complex in structure design, approval processes, and timing arrangements, imposing higher requirements on early planning and multi-jurisdictional co-ordination.

In the context of venture capital or private equity, when VC/PE and founding teams achieve exits through company sales, the specific process is typically designed based on the target company’s scale, regulatory sensitivity, and equity structure characteristics. For medium-to-large technology enterprises (especially in software, IT services, industrial tech), if there are multiple potential buyers, practice often adopts limited auctions or small-scale bidding methods, first screening interested parties through brief information memoranda, then opening data rooms to a few qualified bidders.

In areas involving sensitive data, fintech, mapping, cloud computing, cybersecurity, etc, sellers prefer bilateral negotiations with a few carefully screened buyers to communicate early on national security, data security, and regulatory licensing issues, reducing regulatory attention and leakage risks triggered by broad outreach. In practice, many transactions start with “exclusive talks” initiated by a strategic buyer or state-owned platform, and if feasible alternative offers emerge during negotiations, a decision is taken whether to convert to bidding.

In exit transactions of Chinese privately backed technology companies, common transaction structures mainly include the following:

• Offshore Holding Company Equity Sales: Enterprises adopting red-chip structures typically complete closings through transfers of Cayman/BVI top-level company equities, keeping domestic WFOE and VIE structures unchanged. This method facilitates international buyers’ takeovers, but if involving sensitive industries or changes in actual controllers, may still trigger domestic foreign investment security reviews and industry regulatory approvals.
• Domestic Company Equity Transfers: For pure domestic structures or transactions where buyers are Chinese investors, this is often achieved through transfers of limited liability company or joint stock limited company equities, with foreign buyers needing to comply with the Foreign Investment Law, negative list, and national security review systems.
• Asset Acquisitions or Business Divestitures: If only selling partial business lines or for data and licence isolation considerations, buyers choose asset transactions, transferring equipment, intellectual property, contracts, and personnel separately; such transactions are more complex in labour, taxes, and contract transfers.

In equity sale practice, common arrangements are selling controlling stakes (about 60–80%), with founding teams and some investors retaining minority equities through rollovers for earn-out arrangements and sharing future value appreciation. For targets with higher maturity and stable cash flows, especially concentrated in software, information services, and manufacturing tech enterprises, there has been a growing trend towards full acquisitions by RMB-denominated funds.

In exit transactions of Chinese private technology enterprises, cash consideration remains the most common arrangement. Domestic acquirers typically fund acquisitions through a combination of internal cash resources, bank loans, M&A loans, where the acquirer is a listed company, capital markets instruments such as private placements or convertible bonds.

Equity consideration (share-for-share) is relatively rare between private companies, but when buyers are listed companies or large groups hoping to form long-term bindings with core teams, they often pay partial consideration to founders and key executives through issuing new shares or transferring existing shares. In cases involving Chinese residents directly obtaining overseas listed company stocks, careful attention must be paid to foreign exchange registration, individual income tax, and compliance requirements for holding overseas securities. Common practices include holding undertaking shares through offshore SPVs, partnership enterprises, or employee trusts.

Mixed consideration (cash + stock) arrangements are gradually increasing, helping achieve interest balances when valuation divergences exist. For small transactions, attached performance commitments, milestone payments, or earn-out arrangements are common, but consideration needs to be given to Company Law restrictions on guaranteed repurchases and high default penalties, as well as related tax and accounting treatment impacts.

In sales of private technology enterprises, founders and VC/PE typically need to bear partial responsibilities for representations and warranties, though the scopes, terms, and limits vary greatly:

• Founders/operating teams usually need to make comprehensive representations and warranties on company operations, compliance, intellectual property, data security, employees and labour, key contracts, etc, with responsibility caps often set as certain multiples or proportions of their received consideration, sometimes requiring personal guarantees or accepting longer indemnity periods.
• Financial investors (VC/PE) usually only make limited commitments on their identities, legitimate shareholdings, transfer titles, etc, with responsibility caps generally not exceeding a small portion of their consideration, and mostly “several liabilities” based on shareholding proportions.

In medium-to-large transactions, escrow accounts or holdbacks are common means to secure general indemnity obligations. For larger cross-border transactions, representations and warranties insurance (W&I insurance) is also gradually adopted to reduce sellers’, especially financial investors’, tail risks. Meanwhile, buyers often set special compensation clauses for historical taxes, social security, housing funds, environmental, and data security matters, and extend pursuit periods based on negotiations.

In China, spin-off listings or business divestitures by technology enterprises have become common practices, especially in large internet companies and comprehensive industrial groups, independently separating businesses such as cloud computing, fintech, semiconductors, logistics, data centres, etc, to introduce new investors or list separately. Regulatory authorities and exchanges have issued specific guidelines for spin-off listings, imposing requirements on business independence, related-party transactions, and horizontal competition to protect minority shareholder interests.

The primary factors driving spin-offs include:

• unlocking the value of high-growth businesses to avoid “valuation dilution” by traditional operations;
• achieving “firewall” isolation between financial or data-intensive businesses and other operations in accordance with regulatory requirements;
• introducing industrial or government investors to establish new governance structures at the subsidiary level; and
• creating a more direct equity incentive platform for core teams, closely aligned with the performance of the spun-off entity.

Chinese tax law does not provide a uniform regime fully equivalent to “tax-free spin-offs” in certain Western jurisdictions. However, under enterprise reorganisation rules, special tax reorganisations meeting specified conditions may qualify for deferred tax treatment. Key conditions typically include a reasonable commercial purpose, continuity of equity interests, and continuity of business operations, such as the actual controller maintaining a certain shareholding proportion for a specified period and the transferred assets reaching prescribed thresholds. When conditions are satisfied, disposal gains at the company level may be deferred from recognition.

At the shareholder level, if individual shareholders exchange their parent company shares for shares in the spun-off subsidiary while maintaining continuity of interests, related transfer gains may in certain circumstances qualify for deferral or preferential tax rates. Specific arrangements require co-ordination with the particular spin-off scheme, investor attributes, and prevailing tax policies, necessitating prior consultation with tax advisers and competent tax authorities.

Chinese law permits arrangements involving spin-offs followed by business combinations or equity sales. For instance, a listed company may first spin off specific businesses or assets into a newly established entity, then introduce strategic investors, merge with other operations, or achieve an independent listing.

Such arrangements require comprehensive consideration of:

• rules on major asset reorganisations for listed companies and spin-off guidelines, including requirements for profitability, independence, and horizontal competition;
• potential triggers for foreign investment security reviews and antitrust filings if the transaction involves foreign capital or sensitive industries; and
• data security and cybersecurity assessment requirements when substantial personal information or important data is involved.

Provided that paths are designed in advance with full disclosure of commercial purposes and risks, spin-offs combined with M&A can serve as effective tools for balancing valuation and regulatory compliance.

Ordinary company spin-offs and asset reorganisations with no public listings involved typically require 6–12 months to complete. If involving spin-off listings, additional time must be allocated for exchange reviews, CSRC registration, and industry regulatory approvals. Completion timelines may extend further when significant licences, land use rights, or large-scale employee transfers are involved.

China does not yet have a fully unified mandatory “advance ruling” system. However, for large-scale, complex structures or spin-off reorganisations involving significant tax risks, enterprises typically engage in prior consultations, written inquiries, or memorandum filings with competent tax authorities to confirm applicability of special reorganisation policies. Given variations in local practices, several months are usually reserved for policy consultations and document preparation.

In China, it is common for acquirers to build stakes through secondary market purchases before launching a full tender offer, subject to strict information disclosure rules. When an investor and its concerted parties reach 5% of a company’s issued shares, a simplified equity change report must be submitted to the CSRC and exchanges within the prescribed timeframe and publicly announced. Trading in the stock is prohibited for a certain period before and after the announcement.

The equity change report must disclose the purpose of the stake building, increase/decrease plans for the next 12 months, whether control is sought, and any plans for asset reorganisations or mergers. While China does not impose rigid “put-up-or-shut-up” deadlines as in Anglo-American markets, regulatory authorities may require supplementary explanations from investors with unclear information or abnormal behaviour, and restrict trading when necessary. In sensitive technology sectors, substantial stake building by foreign investors or potential competitors often attracts early attention from the CSRC, National Development and Reform Commission, and industry regulators.

China operates a 30% mandatory offer regime. When an investor and its concerted parties acquire listed company shares through agreement transfers or block trading, causing their shareholding to reach or exceed 30% of total issued shares, they must in principle issue a tender offer to all shareholders for the remaining shares, unless exempted under laws or regulations and approved by the CSRC. Pursuant to the 2024 revisions to the Measures for the Administration of Acquisitions of Listed Companies, exemptions necessitate CSRC approval. Shareholders already holding over 30% may also need to fulfil partial offer obligations upon further increases, depending on circumstances.

In cases such as overall state-owned enterprise reforms, debt-to-equity swaps, or administrative asset allocations, the CSRC may grant exemptions or flexible arrangements to mandatory offer obligations based on needs to protect minority shareholders and maintain market stability.

Common structures for acquiring public technology companies in China include:

• Full or Partial Tender Offers: This involves publicly issuing acquisition offers to all shareholders, either voluntarily or to fulfil mandatory offer obligations.
• Agreement Acquisitions of Controlling Shareholder Shares: The acquirer signs share transfer agreements with controlling shareholders, followed by mandatory or voluntary offers to minority shareholders as appropriate.
• Major Asset Reorganisations: This involves achieving control transfers or asset injections/divestitures through listed companies issuing shares to purchase or sell assets, effectively forming “backdoor listings” or reverse acquisitions.

Unlike statutory mergers common in Anglo-American systems, acquisitions of Chinese listed companies are typically structured through share transfers combined with asset injections.

Public acquisitions may be structured using cash, shares, or a mixed consideration. In technology sector public acquisitions, cash offers are more common, especially those initiated by financial investors or non-listed companies; share considerations are more prevalent in major asset reorganisations involving listed companies issuing shares to purchase assets.

Offer prices are subject to “minimum price” rules: The acquisition price must not be lower than the highest price paid by the acquirer and its concerted parties in certain periods (eg, six months) prior to the tender offer announcement, to protect minority shareholder interests. In major asset reorganisations with share payments, issuance prices must comply with exchange pricing ranges and conclusions from independent valuation institutions.

Due to regulatory and procedural complexities, sophisticated consideration tools like contingent value rights (CVR) are rarely used in A-share public offers, appearing more in controlling shareholder-level agreement arrangements or M&A between non-listed companies.

Chinese regulatory authorities are cautious about conditions in public offers, allowing them in principle but imposing restrictions on conditions that are excessively subjective or subject to the unilateral control of the acquirer. Common conditions include:

• obtaining necessary approvals such as antitrust reviews, industry regulations, and foreign investment security reviews;
• achieving expected share acceptance ratios (in voluntary offers);
• no occurrence of material adverse changes seriously impairing the target company’s assets or operations; and
• compliance with laws, regulations, or prohibitive provisions from regulatory authorities.

For mandatory offers, conditions are stricter, generally prohibiting excessive subjective conditions to prevent acquirers from evading obligations to protect minority shareholders.

In friendly acquisitions and major asset reorganisations, acquirers typically sign transaction agreements with the target company and its controlling shareholders before or concurrently with public announcements. Such agreements generally stipulate:

• parties’ co-operation obligations in regulatory filings and due diligence;
• transitional period operational restrictions and information disclosure arrangements;
• obligations not to actively seek alternative transactions or “no-shop” clauses with exceptions; and
• breach liabilities, termination rights, break fees, or reverse break fees.

As the target, listed companies typically provide limited representations and warranties in transaction agreements regarding title and information disclosure compliance, with operational representations and warranties more often borne by controlling shareholders or actual controllers in their equity transfer agreements.

In voluntary offers, acquirers often set minimum acceptance thresholds to ensure effective control. Common thresholds include:

• exceeding 30%: achieving legal control status in listed companies, though typically aiming to surpass the original controlling shareholder’s proportion;
• exceeding 50%: securing voting rights for ordinary resolutions; and
• exceeding 2/3: securing voting rights for special resolutions (eg, charter amendments, major asset reorganisations).

If acquirers plan subsequent privatisations, delistings, or large-scale business reorganisations, acceptance conditions may be set at higher levels such as 75% or 90% to meet exchange requirements on public float ratios and delisting procedures.

Chinese law has not yet established a comprehensive mandatory squeeze-out mechanism for minority shareholders. Even if controlling shareholders hold 90% or more of a company’s equity, minority exits can generally only be facilitated indirectly through tender offers, agreement-based acquisitions, or delisting procedures. Current rules emphasise granting qualified minority shareholders sell-out rights, requiring controlling shareholders to acquire their shares at fair prices, rather than proactive compulsory squeeze-outs by controlling shareholders.

In the context of non-listed companies, outcomes akin to squeeze-outs may be implemented through mechanisms such as absorption mergers, corporate divisions or share repurchases coupled with capital reductions. These arrangements are subject to strict procedural requirements, including approval by special shareholders’ meeting resolutions, notification of creditors and the provision of repurchase rights for dissenting shareholders, as well as the payment of reasonable consideration.

Although Chinese rules do not use the concept of “certain funds”, they require acquirers to demonstrate sufficient payment capacity when issuing offers and to disclose funding sources and any obtained bank credits or internal approvals in offer reports. In mandatory offers and most voluntary offers, “obtaining financing” is generally not permitted as the sole or primary condition.

Financial advisers typically require acquirers to provide bank financing agreements, internal resolutions, and funding proofs, with banks issuing funding guarantees or commitment letters when necessary. If an offer ultimately fails due to insufficient funds from the acquirer, regulatory authorities may take supervisory measures against them and intermediaries.

Under the premise of not harming minority shareholder interests and market fairness, target companies can grant acquirers certain deal protection arrangements, such as:

• “no-shop/no-talk” clauses restricting boards from actively negotiating other competitive transactions, but usually retaining “fiduciary duty exceptions”;
• matching rights, granting original acquirers a certain time to match superior offers;
• break-up fees or reverse break-up fees; and
• setting time-bound restrictive arrangements for key assets or major contracts.

Excessively high termination fees or arrangements severely restricting shareholder choice rights may be rejected by exchanges or the CSRC. Listed companies providing guarantees or financial assistance to acquirers must comply with external guarantee and related-party transaction provisions.

When acquirers fail to obtain 100% equity, governance rights are typically obtained by:

• securing a majority of board seats and taking positions such as chairman or general manager;
• specifying special voting mechanisms and veto rights for major matters in articles of association and shareholder agreements; and
• arranging related-party transactions, profit distributions, and cash flow management through shareholders’ meetings and board resolutions.

Chinese law does not have German-style “control and profit transfer agreements”, but through combinations of shareholder agreements, articles of association, and related-party transaction rules, group internal resource allocations and benefit sharing can be achieved to a certain extent, while still subject to minority shareholder protection systems and information disclosure obligations.

In friendly acquisitions, obtaining irrevocable commitments from key shareholders (especially controlling shareholders, state-owned shareholders, or institutional investors) to support offers or major asset reorganisations has become increasingly common. Commitment contents typically include:

• voting in favour of the transaction at the shareholders’ meetings;
• not reducing holdings during offer periods; and/or
• committing to accept offers at agreed prices.

These commitments are generally disclosed in acquisition announcements.

Commitment documents may include “superior offer” exceptions – ie, when a clearly superior competitive transaction emerges and is deemed fairer by independent directors or independent financial advisers, commitment parties may change positions after fulfilling certain procedures; for state-owned shareholders, such commitments and exceptions often also require approvals from state-owned asset supervision authorities and party committees.

Public acquisitions are subject to dual supervision by the CSRC and securities exchanges. Acquirers must submit offer acquisition reports, financial adviser reports, audit and legal opinions, etc. Exchanges review the completeness and compliance of information disclosures, while the CSRC conducts substantive supervision on whether acquisitions comply with the Securities Law and the Measures for the Management of Listed Companies Acquisition.

Regulatory authorities generally do not make subjective judgements on whether offer prices are “fair”; instead, they check compliance with minimum price rules, existence of benefit conveyances or insider trading, etc. Offer terms, announcement disclosures, and progress updates are typically uniformly arranged by rules; if competitive offers or major matters arise during offer periods, the CSRC and exchanges may require extensions or supplementary announcements.

Offer acquisition terms and extension conditions are uniformly stipulated by the Measures for the Management of Listed Companies Acquisition and exchange rules, requiring minimum durations and not exceeding prescribed maximum terms. If regulatory approvals such as antitrust reviews or foreign investment security reviews are not obtained before offer periods expire, acquirers may apply for extensions, provided the request is compliant and the reasons are fully disclosed to the market.

In complex or cross-border transactions, transaction parties typically complete major regulatory approvals before or early in offers to reduce market uncertainties and stock price fluctuation risks. Some approvals may be completed during or after offer periods; if final approvals are not obtained, offers usually declare failure, with accepted offer shares resuming circulation.

In establishing technology companies in China, besides general business registrations, some industries also require special licences or filings, mainly including:

• Value-Added Telecommunications Services (VATS): These include cloud computing, data centres, internet information services, CDN, etc, requiring licences issued by the Ministry of Industry and Information Technology or local communications administrations.
• Internet Publishing, Online Games, Online Audiovisual, Online News: These are supervised, respectively, by the National Press and Publication Administration, State Administration of Radio and Television, Cyberspace Administration, etc.
• Fintech and Payment Businesses: These include third-party payments, online small loans, internet insurance, etc, and are subject to supervision by the People’s Bank of China and National Financial Regulatory Administration.
• Cybersecurity, Data Security, and Personal Information Protection: These are supervised by the Cyberspace Administration of China, with joint enforcement by competent industry authorities.

Approval times vary greatly by licence type and location, generally taking several months to a year. If critical information infrastructure or national defence and military-related technologies are involved, requirements for security assessments, ongoing compliance, and foreign access are stricter, directly impacting M&A and investment arrangements.

The core institution for China’s securities regulation is the China Securities Regulatory Commission (CSRC), responsible for unified supervision of stock issuances, listings, ongoing regulations, and listed company M&A reorganisations, tender offers, etc.

Each securities exchange – Shanghai Stock Exchange, Shenzhen Stock Exchange, Beijing Stock Exchange – conducts front-line supervision of listing applications, information disclosures, and trading behaviours based on their own business rules, while accepting CSRC guidance and supervision.

For Chinese concept stock technology enterprises listed in Hong Kong, their overseas listing behaviours are supervised by the Hong Kong Securities and Futures Commission and HKEX; however, according to new overseas listing filing rules, issuers with actual controllers, main businesses, or assets in China must fulfil filing obligations with the CSRC.

Foreign investments are regulated by the Foreign Investment Law and its supporting regulations, as well as Special Management Measures for Foreign Investment Access (Negative List). The list specifies industries prohibited or restricted for foreign investment, such as news publishing, online audiovisual, certain value-added telecommunications services, encryption technology, mapping, etc; industries not on the list in principle enjoy national treatment equivalent to domestic capital.

Additionally, according to the Measures for the Security Review of Foreign Investments, if foreign investments acquire equities or assets in enterprises involving military industries, important agricultural products and energy resources, major infrastructure, important culture and information technology, key technologies, etc, they must declare to the security review working mechanism led by the National Development and Reform Commission and Ministry of Commerce. The review is mandatory and suspensive, with related transactions not implementable before review completion.

China’s national security reviews cover foreign investment security reviews as well as data and cybersecurity levels. In technology M&A, if transactions involve national defence and military industries, critical infrastructure, important information systems, or large amounts of sensitive data, regulatory authorities may require security assessments and, when necessary, issue conditional approvals or prohibit transactions.

In terms of export control, the Export Control Law and related lists control dual-use items, military products, nuclear items, and other important items, technologies, and services related to national security and interests. In recent years, multiple special measures have been introduced for semiconductor manufacturing equipment, specific materials, rare earth-related products, etc. For transactions transferring technologies, software, or chip design tools overseas, buyers and sellers must assess whether they trigger licensing or reporting obligations to ensure compliance.

Pursuant to the Antimonopoly Law (as amended in 2022) and the newly implemented Provisions of the State Council on the Thresholds for Declaring Concentrations of Undertakings (effective 2024), the filing thresholds have been raised. A concentration of undertakings must be notified to the antitrust enforcement authority if all participating undertakings achieved the prescribed turnover thresholds globally or within China in the preceding fiscal year, and at least two of them achieved the specified turnover thresholds within China in the preceding fiscal year. Implementation of the concentration is prohibited without approval.

Furthermore, even where the filing threshold is not met, the antitrust enforcement authority may still require the undertakings to file if there is evidence indicating that the concentration has or may have the effect of eliminating or restricting competition. For instance, in the Qualcomm acquisition of Autotalks case, although the filing thresholds were not met, the antitrust enforcement authority considered there to be evidence of potential elimination or restriction of competition and consequently initiated an investigation. Transactions in platform economies, internet advertising, fintech, and data-intensive industries are particularly prone to heightened scrutiny. Enterprises in relevant sectors should enhance their antitrust compliance awareness, proactively assess antitrust risks, and closely monitor enforcement developments. In technology M&A, particularly transactions involving horizontal overlaps, vertical relationships, or data access, parties should conduct early assessments of filing scenarios, filing obligations, and procedures to mitigate potential risks.

Chinese labour laws provide strong employee protections, requiring acquirers to focus on when integrating technology companies:

• Labour contract terminations must comply with statutory reasons, and in most cases require payment of statutory economic compensation.
• Large-scale layoffs must explain situations to unions or employee representatives 30 days in advance, listen to opinions, and report to labour administrative departments.
• When labour contract entities change (eg, asset transactions), proper arrangements are needed for employee transfers or dismissal compensations.

Although China does not adopt an EU-style “works council” system, large enterprises generally have unions and employee representative congresses. In major adjustments (such as mergers, divisions, layoffs), these organisations have substantial influence. Although they do not constitute absolute legal constraints on boards, failure to properly consult or address employee concerns may lead to collective labour disputes, regulatory intervention, or administrative penalties.

China implements a managed foreign exchange system, overseen by the State Administration of Foreign Exchange and People’s Bank of China. Although capital accounts are gradually opening, cross-border equity investments, overseas financing, profit remittances, and asset transfers still need to comply with strict registration and foreign exchange settlement provisions.

General equity M&A does not require case-by-case central bank approvals, but the following matters need registration or filing as stipulated:

• capital injections and increases for foreign-invested enterprises;
• domestic residents’ participation in overseas SPV establishments and equity incentives (commonly known as “red-chip filings”); and
• cross-border M&A loans and overseas guarantees.

Reasonable transaction structure designs can complete transactions through offshore consideration settlements and domestic reinvestments without violating foreign exchange controls.

In the past three years, institutional changes closely related to technology M&A mainly include:

• implementation of the new Company Law: systematic adjustments to paid-in registered capital payment schedule, shareholder contribution responsibilities, directors’ and executives’ diligence obligations, equity repurchases, and employee shareholdings, forcing many technology enterprises to “catch up” early, normalise capital structures, and strengthen boards’ attention to compliance risks;
• adjustments to antitrust enforcement and filing standards: raised filing thresholds to reduce formal burdens for some small and medium transactions, but enforcement authorities are more proactive in substantive reviews of platform economies and data-intensive M&A, while granting greater discretion to concentrations “below thresholds but with impacts”;
• implementation of overseas listing filing systems: unifying filing paths for direct and indirect overseas listings of Chinese concept stocks, imposing clearer requirements on connections between red-chip structures, VIE arrangements, domestic and overseas M&A reorganisations, and future listing plans; and
• refinements to personal information protection and cross-border data rules: the successful introduction of a series of supporting details around the Personal Information Protection Law and Data Security Law, forming multiple cross-border transmission paths such as security assessments, standard contracts, and certifications, requiring remote due diligence, system integrations, and data sharing in technology M&A to proceed within more refined compliance frameworks.

Taken together, these developments are driving China’s technology M&A away from a predominantly price-driven model towards transactions that are increasingly shaped by compliance considerations and structural design.

Due diligence in technology M&A has evolved from traditional review of corporate status, finances, and intellectual property to multi-dimensional comprehensive examinations. Typical new focuses include:

• data classification and compliance: assessing whether involving personal information, important data, or core data; whether fulfilling data localisation and cross-border transmission obligations;
• cybersecurity: reviewing multi-level protection scheme (MLPS) classifications, certifications, system vulnerability and historical security incident reviews;
• export control and sanctions compliance: businesses involving semiconductors, algorithms, encryption technologies, and dual-use military-civilian technologies;
• platform economy, antitrust, and algorithm regulatory risks; and
• ESG and content regulatory risks, especially for platform businesses with large C-end users.

The purpose of due diligence is not only to “discover problems” but also to assess these risks’ potential impacts on valuations, transaction structures, closing conditions, and integration schemes, including the potential need for partial divestments, phased closings, or special consideration arrangements.

For listed companies, due diligence must comply with Securities Laws and Information Disclosure Rules. In friendly tender offer acquisitions or major asset reorganisations, target companies may provide non-public information to potential acquirers after signing confidentiality agreements, but prerequisites include the following:

• Information disclosures should be controlled within necessary scopes, avoiding situations where substantive insider information is long-term open only to single parties.
• If non-public information may have major impacts on stock prices, it should be publicly announced through listed company announcements at appropriate times.
• Where there are multiple potential bidders, substantially different information should, in principle, not be provided to different bidders, in order to preserve fairness in the transaction process.

When involving national security, trade secrets, or large-scale personal information, target company boards are more cautious in determining the depth and manner of information disclosure. In such cases, prior regulatory approvals may be required, or original data disclosure may be replaced by alternative approaches such as data masking, on-site reviews and reliance on third-party reports.

Data privacy and data security laws directly restrict due diligence methods and contents. The Personal Information Protection Law, Data Security Law, and Cybersecurity Law require the following:

• Personal information and important data are to be stored domestically, with overseas provisions requiring security assessments, standard contract signings, or certifications.
• Critical information infrastructure operators are to be subject to stricter security assessments for cross-border transmissions of personal information and important data.
• Granting overseas investors access to databases containing sensitive personal information or important data is likely to be regarded as “providing data overseas”, thereby triggering the need for prior regulatory compliance procedures.

Therefore, common arrangements in technology M&A due diligence include:

• establishing “clean teams” domestically to access only desensitised or aggregated data;
• restricting overseas personnel remote access;
• substituting direct reading of underlying original data with third-party compliance assessment reports; and
• if cross-border data transmissions are indeed needed, incorporating CAC security assessments into transaction conditions and timelines.

Once acquirers decide to acquire listed company shares and possess implementation conditions, they should timely disclose acquisition intentions or tender offer preplans on exchange-designated media according to the Securities Law and Measures for the Administration of Acquisitions of Listed Companies. If acquisitions obtain controlling shareholder shares through agreement transfers, agreement signings and main contents should also be announced timely.

When holdings reach the 5% disclosure threshold, acquirers must disclose equity change situations and increase/decrease holding plans for the next 12 months; if acquisition plans undergo major changes thereafter, announcements should be made again. The regulatory authorities’ core goal is to ensure any major information potentially affecting stock prices is rapidly conveyed to all investors rather than to just a few interested parties.

If tender offers or business combinations involve issuing new shares (eg, listed companies issuing shares to purchase assets), prospectuses or listing documents complying with CSRC and exchange requirements usually need compilation. Documents should fully disclose:

• target asset financial conditions and business situations;
• transaction structures and pricing bases; and
• risk factors and potential impacts on company finances and governance structures.

In cross-border stock swaps, if using overseas listed company stocks to pay consideration to Chinese investors, compliance with domestic foreign exchange, cross-border securities investment, and relevant exchange rules is needed. Practical paths are complex and uncommon, so when technology enterprises are acquired by A-share or H-share listed companies, cash or A/H-share considerations remain predominant.

In cash offers, share considerations, and major asset reorganisations, acquirers and target companies must provide historical financial data, audit reports, and necessary pro forma financial information as core contents of disclosure documents.

Listed companies must prepare financial statements according to Chinese Accounting Standards, with overseas listed companies possibly also adopting IFRS or US GAAP. In the context of major asset reorganisations, where technology assets are proposed to be injected into listed companies, it is customary to provide audited financial reports covering the most recent three to five financial years, together with post-transaction consolidated pro forma statements to enable investors to assess M&A impacts on company asset-liability ratios, profitability, and cash flows.

In listed company M&A, the main terms of core transaction documents (share transfer agreements, asset purchase agreements, merger agreements, irrevocable commitments, etc) must be disclosed in announcements, with originals submitted to regulatory authorities and exchanges for filing. If documents contain trade secrets, technical secrets, or personal information, specific sensitive information may be appropriately masked, but confidentiality may not be used to conceal terms with major impacts on shareholder rights and investment decisions.

In technology M&A between non-listed companies, there are generally no mandatory public disclosure obligations, but if transactions trigger foreign investment approvals, antitrust reviews, export control licences, or data security assessments, related agreements or resolutions may still need filing or submission to competent authorities for review.

According to the Company Law, directors owe duties of loyalty and diligence to the company, acting in the overall interests of the company and all shareholders, not for single shareholders or personal interests. In M&A transactions, core duties include:

• carefully assessing whether transaction schemes align with the company’s long-term development and all shareholders’ interests;
• adequately understanding transaction considerations, fairness, and potential risks, and making independent judgements accordingly;
• ensuring information disclosed to shareholders and regulatory authorities is true, accurate, complete, without major omissions; and
• avoiding using positions to usurp company opportunities, conduct undisclosed related-party transactions with the company, or leak insider information.

If the company faces insolvency or severe financial difficulties, directors also need to pay attention to creditor interests, preventing malicious asset transfers or harming creditors’ fair repayments.

In major related-party transactions, management buyouts, or control change situations, it has become increasingly common for listed company boards to establish independent director special committees or ad hoc committees. Committee members are typically composed of independent directors, responsible for:

• engaging independent financial advisers and legal advisers;
• reviewing transaction necessities, fairness, and impacts on minority shareholders; and
• issuing independent opinions for reference by regulatory authorities, shareholders, and investors.

For common “controlling shareholder/management-initiated privatisations” or “related-party asset injections” in technology enterprises, special committees’ review conclusions and opinions have important reference value, while helping reduce director liability risks.

In M&A transactions, boards are neither passive “rubber stamps” nor arbitrary “moats” resisting M&A. In practice, boards typically need to:

• lead the selection and supervision of external advisers, and engage in repeated deliberation and negotiation regarding transaction structures;
• prudently assess pros and cons of different transaction paths (sales, IPO, continued independent development);
• provide clear recommendation opinions and reasons to shareholders in announcements; and
• when hostile acquisitions or competitive offers arise, balance maintaining the company’s long-term value with safeguarding shareholder choice rights.

In recent years, developments in class action litigation and investor protection systems have increased cases of shareholders suing in relation to board-recommended M&A transactions, especially involving related-party transactions, asset impairments, and information disclosure distortions. Potential acquirers should reserve sufficient compliance and communication space in timelines and disclosure rhythms.

Chinese listed companies’ M&A transactions almost all engage independent financial advisers and law firms. Financial advisers need to issue professional opinions on transaction price reasonableness, impacts on minority shareholders, earnings expectations, and potential risks, functioning similarly to US “fairness opinions”, but with more flexible forms.

Legal opinions focus on corporate governance and procedural compliance, regulatory approvals, foreign investments, antitrust, data, and cybersecurity aspects. For cross-border technology M&A, inland lawyers, Hong Kong lawyers, and lawyers from relevant overseas countries/regions are usually needed to collaboratively issue opinions, ensuring regulatory requirements from different jurisdictions are implemented in unified executable transaction structures.