Securities Firms Flock to M&A, Industry Sees Mid-Sized Brokers as Most Valuable

Why does the value of mid-sized brokerages become more prominent during industry consolidation?

Recently, although Xiangcai Securities’ acquisition of financial information service platform “Dazhihui” has been temporarily halted, several other mergers and acquisitions are underway, such as “Dongwu Securities + Donghai Securities” and “CICC + Dongxing Securities + Cinda Securities.”

It is clear that industry M&A activity is heating up. In this regard, Professor Tian Xuan, a distinguished scholar at Peking University, stated that this marks a new phase where brokerage industry consolidation shifts from primarily risk management to a focus on capability restructuring and value creation.

The “14th Five-Year Plan” explicitly emphasizes cultivating top-tier investment banks, with policies continuously optimizing M&A and restructuring systems to facilitate the expansion and strengthening of quality brokerages. Tian Xuan pointed out that with policy support and market competition driving together, industry concentration is expected to further increase, and the development logic of brokerages is also changing.

“Basically, there are only two ways for Chinese brokerages to grow bigger,” said Wei Hongbo, Chairman of Ji’an Jinxin Group. One is through mergers and acquisitions to achieve scale expansion; the other is leveraging traffic platforms to quickly acquire clients and surpass competitors. The former aligns with traditional brokerage development paths, while the latter, represented by companies like Eastmoney, relies on traffic conversion for leapfrog growth.

The integration attempt between Xiangcai Securities and Dazhihui is also seen by the market as following the traffic conversion route. Tian Xuan believes that in future brokerage competition, resources from financial information platforms will become one of the core competitive advantages. By analyzing user behavior data, brokerages can accurately understand investor needs and offer personalized services. Additionally, integrating trading portals can help brokerages manage accounts uniformly, control risks, and respond to service demands.

However, Wei Hongbo pointed out that traffic conversion pathways are not universally applicable. On one hand, platforms with large-scale traffic are scarce; on the other hand, regulatory scrutiny over related integrations is tightening, making it difficult for such strategies to become mainstream in the industry.

Compared to the debate over pathways, the more direct driving force comes from industry realities. Wei Hongbo explained that under current market conditions, brokerages face increased difficulty in raising funds through private placements, and overall returns in the industry are relatively low, limiting the capital market’s acceptance of brokerage financing. M&A, to some extent, has become a way to supplement capital.

Structurally, industry consolidation remains in progress. Wei Hongbo noted that mergers between large brokerages are more challenging, while smaller brokerages with limited resources and less appeal are less likely to be involved in meaningful consolidation. Those with real value are typically mid-sized brokerages with a solid client base and business capabilities.

The difficulty in M&A lies not in the transaction itself but in subsequent integration. Tian Xuan pointed out that while M&A can help increase scale and optimize business layouts, challenges remain in cultural integration, system connectivity, and talent retention. Realizing synergies takes time, and if integration falls short of expectations, it may even lead to resource wastage and decreased efficiency.

In the long term, industry patterns are gradually becoming clearer.

Tian Xuan believes that in the future, China’s brokerage industry will feature a “concentration at the top + differentiated stratification.” Under policy guidance and market competition, leading brokerages will continue to expand through M&A and capital operations, potentially creating several internationally competitive top-tier investment banks. However, due to market development stages, client structures, and regional differences, achieving the high level of concentration seen in global investment banks remains challenging.

Additionally, small and medium-sized brokerages will accelerate their transformation toward specialization, regional focus, and unique features. Tian Xuan stated that these brokerages will form a multi-layered, differentiated industry ecosystem with leading institutions, meeting diverse financial needs across wealth management, green finance, tech innovation services, and inclusive finance sectors.

Wei Hongbo believes that China’s brokerage system may evolve into a multi-tier structure, comprising a few large investment banks with international competitiveness, several influential top-tier brokerages domestically, and a number of regional and specialized institutions coexisting. (China News Service App)

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