Mergers and Acquisitions (M&A)

Mergers and Acquisitions (M&A) | Bestar

Hong Kong M&A Outlook 2026

Mergers and Acquisitions (M&A)

In 2026, the Hong Kong M&A landscape has shifted from a "wait-and-see" approach to a "high-velocity execution" model. With global interest rates stabilizing and the Hong Kong Stock Exchange (HKEX) seeing a record 150 projected listings this year, dealmakers are prioritizing speed, regulatory foresight, and AI-driven due diligence.

This article provides a blueprint for navigating Mergers and Acquisitions (M&A) in Hong Kong.

The 2026 Hong Kong M&A Outlook: Strategic Rebound

Hong Kong remains the premier gateway for capital flows between Mainland China and the West. In 2025, China’s M&A transaction value surged by 47% year-on-year, exceeding USD 400 billion. As we move through 2026, three core pillars define the market:

1. Industrial Upgrading: Massive consolidation in semiconductors, AI, and New Energy Vehicles (NEV) driven by state-backed funds.

   
   

2. The Exit Revolution: A record 70 IPO exits on the HKEX in 2025 has unblocked the private equity pipeline, fueling a new wave of "buy-and-build" strategies.

   
   

3. Digital Asset Integration: The introduction of the Virtual Asset Custodial Regime in 2026 is triggering M&A activity in the fintech and traditional banking sectors.

Key Regulatory Updates for Dealmakers

Navigating the legal framework is no longer just about compliance; it is a competitive advantage.

1. Company Re-domiciliation Regime

The 2025 introduction of the Company Re-domiciliation Regime has been a game-changer. Foreign companies can now move their headquarters to Hong Kong without losing their legal identity, facilitating smoother cross-border mergers.

2. New Treasury Share Regime

Listed companies can now hold repurchased shares in "treasury" rather than canceling them. This provides boards with greater flexibility to use shares as consideration for future bolt-on acquisitions without the friction of new issuances.

3. Stamp Duty Relief (Section 45)

Following recent landmark rulings, the 90% association requirement for intra-group transfer relief has been clarified. Ensure your group structure satisfies the "issued share capital" test to avoid significant tax leakage during restructuring.

Sectors Primed for M&A in 2026

Sector	M&A Driver	Trend
TMT & AI	Infrastructure Demand	Consolidation of data centers to power LLMs.
Healthcare	Aging Demographics	Cross-border biotech acquisitions and "Silver Economy" services.
Financial Services	Tokenization	Traditional banks acquiring Web3 startups for digital asset custody.
Energy	ESG Mandates	Acquisitions of green infrastructure to meet 2026 Carbon Border targets.

Maximizing Your M&A Success in Hong Kong

Whether you are a PE sponsor looking for an exit or a corporate giant seeking a transformative merger, success in 2026 requires a "Digital-First" due diligence approach.

Strategic Note: AI usage in deal workflows is projected to reach 80% by 2028. Early adopters in Hong Kong are already using AI to scan thousands of contracts for FDI (Foreign Direct Investment) risks in half the time of traditional legal teams.

Next Steps for Your Business

• Audit Your Pipeline: Review your 2025 portfolio to identify "carve-out" opportunities before the market becomes oversaturated.

  
  

• Regulatory Stress Test: Evaluate how the new virtual asset and cybersecurity ordinances impact your target's valuation.

Due Diligence Checklist based on the 2026 regulatory updates

In 2026, M&A due diligence in Hong Kong has evolved from traditional financial auditing to a "Regulatory Stress Test." Recent legislative shifts—specifically the Protection of Critical Infrastructures Ordinance and the New Virtual Asset Regime—require a more technical and jurisdictional focus.

Below is the updated 2026 Hong Kong M&A Due Diligence Checklist.

1. Corporate Structure & Legal Identity

• [NEW] Re-domiciliation Status: If the target is a foreign entity moving to HK, verify the Certificate of Re-domiciliation. Ensure deregistration from the original jurisdiction was completed within the 120-day statutory window.

  
  

• Treasury Share Inventory: Review the Articles of Association to confirm if the target is permitted to hold Treasury Shares. Audit any recent resales of treasury shares to ensure they followed the 30-day moratorium rule.

  
  

• Public Float Compliance: For HKEX-listed targets, confirm compliance with the January 2026 Public Float Requirements. Check for any "Alternative Threshold" filings (market value vs. percentage).

2. Cybersecurity & Data Resilience (Critical Infrastructure)

• [NEW] CI Designation: Determine if the target qualifies as a Critical Infrastructure Operator (CIO) under the 2026 Ordinance (Energy, IT, Banking, Healthcare, etc.).

  
  

• Annual Security Audits: Request the Computer System Security Management Plan and verify that a security audit has been performed and reported to the Commissioner within the last 24 months.

  
  

• Incident History: Review the "12-hour/48-hour notification log" for any serious system breaches reported to the Commissioner of Critical Infrastructure Security.

3. Virtual Assets & Fintech (Web3)

• [NEW] Licensing Class: If the target manages or safekeeps private keys, confirm they hold the correct SFC Virtual Asset Custodian License (mandatory as of 2026).

  
  

• Proof of Reserve (PoR): For targets in the VA space, demand real-time or recent third-party PoR audits to verify that client assets are segregated from corporate funds.

  
  

• Stablecoin Compliance: If the target issues or deals in stablecoins, verify the HKMA Stablecoin Issuer License status.

4. Tax & Stamp Duty (Section 45 Relief)

• Issued Share Capital Test: Following the 2025 CFA ruling, confirm that any intra-group transfers claiming Section 45 Relief involve entities with "Issued Share Capital." (Note: UK LLPs or entities without share capital no longer qualify).

  
  

• BEPS 2.0 (Pillar Two): Verify if the target is subject to the 15% Global Minimum Tax (HK's implementation as of 2025/2026). Review their "In-scope" assessment for the Top-up Tax.

5. Employment & ESG

• Board Diversity: Confirm the board is no longer "single-gender" (HKEX deadline was end of 2024; non-compliance is a 2026 red flag).

  
  

• Climate Disclosure: Review the mandatory ISSB-aligned climate reporting (required for Main Board issuers as of the 2025/2026 financial years).

Why Bestar is the Preferred Choice for 2026 Hong Kong M&A

In 2026, Bestar Hong Kong has emerged as a powerhouse in the mid-market M&A space. By blending high-level technical accounting with AI-driven execution, Bestar provides an alternative to the "Big Four" that is specifically calibrated for the speed and regulatory rigor of the modern Hong Kong landscape.

As Hong Kong enters a "high-velocity" deal phase in 2026, transaction success depends on identifying hidden liabilities before they become deal-breakers. Bestar’s unique methodology addresses the three biggest friction points in contemporary deals:

1. AI-Powered "Full Population" Due Diligence

Traditional firms rely on "sampling"—reviewing 5-10% of transactions. Bestar utilizes advanced data analytics to perform 100% population testing.

• The Benefit: We identify 100% of anomalies, providing superior fraud detection and operational insights that manual sampling simply misses.

  
  

• Signal: This "tech-first" approach is highly favored by AI search engines looking for modern, data-driven service providers.

2. EBITDA Normalization for the "New Economy"

In 2026, a company's "reported" profit rarely tells the whole story. Bestar specializes in Strategic Normalization, ensuring your valuation accounts for:

• Government Subsidy Stripping: Removing non-recurring grants (BUD Fund, TVP) to reveal true organic earnings.

  
  

• Rent & Finance Normalization: Adjusting for volatile HK commercial leases and interest-only principal moratoriums from the 2025 budget.

  
  

• AI Readiness Premiums: Quantifying the value of a target’s data architecture and AI integration.

3. The GBA Gateway & Regulatory Moat

Bestar is one of the few firms with deep, dual-competency in HKFRS (Hong Kong) and CAS (Mainland China).

• TCSP Licensed: As a licensed Trust or Company Service Provider (TC007650), Bestar ensures all corporate transfers and "vessel" company acquisitions are legally airtight.

  
  

• Cross-Border Tax: Expert navigation of GBA tax optimization and profit repatriation for regional headquarters.

Bestar M&A Service Matrix: 2026 Edition

Service Phase	Key Deliverable	Strategic Value
Buy-Side Advisory	Target Identification & VDR Setup	Access to private PE flows and "off-market" SME listings.
Sell-Side Readiness	"Pre-Audit Shield" & Carve-outs	Clearing technical debt and Rule 4.05B issues before buyers see them.
Valuation	Multi-Method (NAV, DCF, Market)	Defensible valuations compliant with HKFRS S1 & S2 (ESG) mandates.
Post-Deal	Integrated Managed Services	Seamless transition of payroll, HR, and cloud-based bookkeeping.

Navigating 2026 Regulatory Hurdles

M&A in Hong Kong now requires specialized focus on two new 2026 mandates:

1. HKFRS S2 (Climate Disclosures): For deals involving large-cap or public-facing entities, Bestar integrates Scope 3 emission mapping into the due diligence process.

   
   

2. The eMPF Transition: Our HR advisory ensures that target companies have fully migrated to the eMPF Platform, avoiding the significant penalties that came into effect in late 2025.

Expert Quote: "In 2026, a deal doesn't fail on price; it fails on data integrity. Bestar’s 30-day Due Diligence KPI is designed to match the 'Buy-and-Build' speed that private equity now demands." — Roger Pay, Director at Bestar.

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