CMSC: There are certain common characteristics in completed or ongoing securities brokerages mergers and acquisitions.

CMSC released a research report stating that completed or ongoing securities industry mergers and acquisitions have certain commonalities, namely that the parties involved in the transaction are often controlled by the same entity. State-owned enterprises divest securities firm equity in response to regulatory requirements and to focus resources on core businesses, while private enterprises divest securities firm equity to reduce operational pressures. To explore potential merger and acquisition opportunities, focus on the following strategies: two or more securities firms under the same controlling entity, state-owned enterprises divesting non-core equity projects, and if the divested projects have relative advantages in asset management and investment banking, the probability of being acquired will increase significantly. CMSC's main points are as follows: Looking back at history From the revitalization of the market with the "Six Suggestions" in the 1990s, to the issuance of the first version of the "Nine Regulations" in 2004, marking the beginning of the comprehensive governance era after industry violations and bankruptcies, to the implementation of the "One Participant, One Controller" policy in 2008 to control inter-industry competition and reshape the industry landscape, and then the release of the second version of the "Nine Regulations" in 2014, with innovation becoming the key word for industry development, securities firms "taking what they need" and sparking a wave of market-oriented mergers and acquisitions. Now, under the goal of becoming a financial powerhouse, the third version of the "Nine Regulations" has been released, with a focus on functionality, marking the start of a new round of mergers and acquisitions restructuring in the industry. It can be observed that each round of mergers and acquisitions in the securities industry is closely related to the supporting cycle of the capital market; and each round of capital market policies is aimed at solving the structural contradictions faced by the securities industry in the "old period" and meeting the new demands of the securities industry in the "new period". Impact of securities industry mergers and acquisitions In terms of industry structure, as the proportion of market-oriented factors in merger and acquisition motivations increases, the industry gradually transitions from "diversification" to "strengthening the leading players" and "developing differences in the middle." In terms of business development, the beginning is often accompanied by the accumulation of business risks and the industry falling into operational difficulties. Subsequently, after regulatory agencies clarify business standards, business development enters a period of rectification, and the industry structure undergoes a reshuffling phase. Innovation in business is then nurtured in the soil of compliance and regulation. This upward spiral process is particularly evident in the development of margin trading arrangements. In terms of company impact, taking CITIC SEC as an example, during a bear market, it expanded low-cost mergers and acquisitions with Jin Tong, Wan Tong, and Guangzhou Securities, creating a strong brokerage business network; it also acquired Lyon Securities during the global financial crisis and expanded its overseas business. Multiple rounds of mergers and acquisitions have strengthened its business, promoted effective integration, and contributed to CITIC SEC becoming a dominant player in the securities industry across market cycles. "Guokun + Haitong" micro perspective In terms of the necessity and feasibility of mergers and acquisitions, the regulatory support for "cultivating first-class investment banks and financial institutions" and advancing the construction of an international financial center for listed companies has become the driving force for Guokun and Haitong to collaborate. With the industry sentiment weakening, the costs of external expansions are reduced, and the positive integration of Shanghai state-owned assets further advances. Regarding the focus of mergers and acquisitions, the transaction plan has been disclosed, but challenges such as personnel integration, license allocation, asset risk disposal, and the merger of Hong Kong subsidiaries still exist. This not only affects the business prospects of the new entities post-merger, but also serves as a model and example for future mergers and acquisitions among leading securities firms. Regarding the financial situation of the new entities, their balance sheets are stronger and more balanced, continuing Guokun's cautious and prudent risk control philosophy. There is potential for the new entities to fully open up their asset allocation space. In terms of specific business segments, brokerage, investment banking, and credit business all have the potential to surpass CITIC, with significant improvements in asset management/trading rank, challenging CITIC's position. Market review Looking at market trends, each wave of securities firm mergers and acquisitions has been accompanied by market rebounds/rises. In terms of style performance, one month and three months after each round of mergers and acquisitions, the style of small-cap stocks has clearly outperformed. In terms of industry performance, the non-banking financial industry has not always outperformed in the early stages of each round of mergers and acquisitions. In only two rounds of mergers and acquisitions - 2009 and 2014, did the sector see significant increases, with the highest increase in 2009. Using the merger of Shenwan Hongyuan and Hyung Securities as an example, it was found that significant excess returns were achieved at three key points: after the announcement of the restructuring plan, when the company is about to delist, and when the new entity is listed. During the suspension of trading of the companies involved, the non-banking financial sector saw a significant increase. Risk warning: Integration falls short of expectations; Market experiences unexpected downturns; Existing policy effects fall short of expectations; New policy stance shifts towards tightening; Liquidity tightens unexpectedly; Continued decline in business fees, etc.