Only when the market can fully express itself and protect its rights can mergers and acquisitions flourish and generate new hopes and dynamics.

As the crown jewel of investment banking, mergers and acquisitions are opening a new chapter in China's economic transformation. Recently, the Shanghai Stock Exchange compiled and released a collection of representative M&A cases from the past few years in the Shanghai market, titled "Compilation of Typical M&A Cases." The compilation specifically selected cases corresponding to four negative types: inadequate prevention of insider trading, financial fraud by target companies, speculative stock price manipulation through trendy restructuring, and loss of control over blindly cross-sector targets. This is intended to guide listed companies and intermediaries to establish correct development concepts and plan and advance M&A activities in compliance.

The current wave of mergers and acquisitions is basking in the warm breeze of policy support, from the new "National Nine Measures" to the "Six Measures for Mergers and Acquisitions," from the exchange's mergers and acquisitions symposium to the explicit support from the National Development and Reform Commission, the Ministry of Industry and Information Technology, and others. The frequent policy support is due to the mission of mergers and acquisitions to carry the economic renewal. After decades of rapid growth, China's economic system has reached a moment of systematic renewal and revaluation of pricing. At this time, through mergers and acquisitions, systematic renewal to reset the resources of various elements, risk pricing revaluation, reshaping, and reconstruction of supply-side assets, as well as revitalizing the increasingly sunken large amount of existing assets, are not only urgent but also beneficial to advance early.

Timeless and ever-new, for the entire economic system, mergers and acquisitions (M&A) are not only a comprehensive physical examination of the economic and financial system but also a proactive treatment tailored to the specific needs. Initiating M&A activities early can help gather new momentum for economic development. For the government, enterprises, and residents, the upcoming wave of M&A will systematically start the process of repairing the balance sheets of these three sectors, freeing them from the intertwined relationships of the past. It is important to understand that the insufficiency of effective demand is fundamentally due to the purchasing power that supports demand being trapped in economic relationships that lack liquidity and convertibility, losing its regenerative ability. This requires M&A to allow it to bid farewell to the past and renew itself into new economic and social relationships.

Of course, mergers and acquisitions (M&A) are a form of advanced capital operation and are a double-edged sword. Their complexity exceeds that of other capital market activities, which has led to a relatively low success rate in M&A transactions throughout international history. After all, integrating two or more entities with different corporate cultures, business philosophies, and behavioral patterns into a new belief system and narrative framework to achieve synergies and to find the greatest common divisor of interests for all parties involved is no easy task. Typically, M&A transactions introduce complex arrangements such as earn-outs and options, transforming a one-time cooperative game into a multi-layered stag hunt game over time. This repetition extends the cooperation chain among all parties, preventing any party from engaging in deceptive behavior. Due to the inherent information asymmetry in M&A, to ensure that the acquired party speaks truthfully, it is necessary to design a transaction structure that includes repeated game scenarios. This ensures that the acquired party becomes an important beneficiary post-merger, thereby creating a binding of interests and increasing the probability of successful M&A.

The four major risks listed by the Shanghai Stock Exchange, including improper prevention of insider trading, are actually typical deceptive behaviors by the information holders in mergers and acquisitions. Moreover, a relatively unique risk-sensitive point in domestic mergers and acquisitions is that both the acquiring party, the acquired party, and intermediary institutions may become perpetrators, making small investors in the capital market the primary victims. Therefore, domestic market investors generally view mergers and acquisitions as trading opportunities rather than investment opportunities. This is detrimental to the healthy development of mergers and acquisitions business.

One of the key reasons that mergers and acquisitions are shrouded in short-term transactions is the lack of market self-regulation and autonomy. Therefore, the immediate priority is to correct and rectify the practices in mergers and acquisitions. This requires the introduction of mechanisms such as options and wager agreements in the transaction structure, allowing all parties involved to fully express their interests in these long-term transactions. Based on the principle of equality of rights and responsibilities, this ensures that all stakeholders can fully express their interests and engage in negotiations, while also bearing corresponding responsibilities based on the benefits they enjoy, thereby preventing free-riding in transactions. To make such long-term transaction structures truly credible and feasible, and to ensure that all stakeholders can genuinely feel the security of the transaction, it is necessary to improve market self-regulation and autonomy in transaction systems and order. This requires the enhancement of information disclosure and inquiry systems, as well as the advancement and improvement of collective litigation systems, adversarial evidence systems, and dispute resolution systems with Chinese characteristics, ensuring that all participants in the transaction have legitimate rights to balance against each other.

Additionally, in rectifying merger and acquisition (M&A) restructuring activities, it is necessary to impose constraints on administrative transfer-based M&A restructuring. For cases involving administrative M&A restructuring, options such as cash consideration should be provided to small and medium-sized investors. Moreover, the cash consideration plan must facilitate cooperative game negotiations between the M&A parties and small and medium-sized investors, ensuring that the cash consideration offered is not lower than the net asset value per share of the relevant target securities, thereby safeguarding the legitimate rights and interests of small and medium-sized investors.

Merger and acquisition restructuring is a journey of renewal for China's economic and financial system. To rejuvenate the old tree with new buds, the key lies in improving the cross-period transaction structures, transaction systems, and order, strengthening the market's self-regulation and autonomy functions, and enhancing the market's ability for free choice and cooperative game play. Only when the market can fully express and protect its rights can merger and acquisition restructuring branch out and generate new hopes and dynamics.