(Yicai) April 11 -- Listed Chinese companies are increasingly targeting firms whose initial public offerings fell through for mergers and acquisitions.

About 30 percent of the 34 mergers and acquisitions announced so far this year by companies traded on the Shanghai Stock Exchange have involved businesses that previously failed to go public, mainly in the semiconductor, automotive, and biopharmaceutical sectors.

Gch Technology said on April 8 that the producer of additives for synthetic resins and modified plastics was planning to acquire just such a company. Tianjin Motor Dies, an auto chassis mold maker, said a day later that it intends to buy an additional 50 percent of affiliate Dongshi Motor Technology Group, whose Shenzhen IPO filing was ultimately unsuccessful.

These businesses, having undergone rigorous IPO preparations, present attractive opportunities due to their operational scale, improved compliance after rectifications, and growth prospects, an investment banker told Yicai.

Venture capitalists often offer failed IPO candidates to buyers at lower prices to facilitate a quick exit, which increases the chances of reaching a deal, according to Tian Lihui, dean of the Institute of Financial Development at Nankai University.

But not all M&A attempts by listed companies targeting failed IPO candidates ultimately result in a deal. “Most of the deals that fail are because of asset valuation differences between the two parties, as sellers often inflate prices by comparing them with the IPO price,” Tian said.

“If the gap between the asking price and the buyer's expectations is too wide, the chances of a successful acquisition are slim,” he pointed out. Another reason why such M&As flop is when the target has not rectified the compliance issues identified in the IPO review process, Tian added.

Editors: Tang Shihua, Futura Costaglione