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China has introduced a preliminary version of revised regulations for merger and acquisition (M&A) loans, expanding their scope to cover equity acquisitions and refining associated conditions. The draft, open for public feedback until September 20, outlines a new M&A category beyond traditional takeover purchases—specifically, equity acquisitions.
Under these new guidelines, commercial banks may lend up to 60% of the transaction value for deals involving minority stakes in companies, with a maximum loan maturity of seven years. Equity acquisitions are defined as transactions where at least 20% of a company’s shares are acquired at once. If the buyer already owns 20%, the additional acquisition must be at least 5%.
The draft also relaxes some of the requirements for takeover acquisition loans. Specifically, banks can now lend up to 70% of the transaction amount for controlling stake purchases, increased from 60%. The maximum repayment period has been extended from seven to ten years.
To qualify for these loans, lenders must have at least CNY 50 billion (around USD 7 billion) in consolidated assets for takeover loans and CNY 100 billion (approximately USD 13.9 billion) for equity acquisition loans.
In terms of risk management, the total exposure from takeover or equity acquisition loans must not exceed 50% or 30%, respectively, of a bank’s Tier 1 capital. The exposure to any single borrower is limited to 5%.
Earlier this year, the regulatory authority initiated a pilot program in 18 cities, easing M&A loan rules for tech companies, including increasing the maximum loan-to-value ratio from 60% to 80% and extending the maximum loan term from seven to ten years.
During the first half of the year, China saw 3,531 M&A deals completed—down 3.9% compared to the previous year—yet the total transaction value rose by 1.9%, reaching about CNY 798.3 billion (roughly USD 111.3 billion).
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