In brief
On 31 December 2025, the National Financial Regulatory Administration of the PRC published the Administrative Measures of Merger and Acquisition Loans of Commercial Banks (《商业银行并购贷款管理办法》) ("New M&A Loan Measures"), which came into effect on the same day. The New M&A Loan Measures repeal and replace the regulatory regime governing M&A loans that has been in effect since 2015 ("Old Rules").
The New M&A Loan Measures apply to M&A loans provided by PRC commercial banks to:
- A PRC company as borrower
- A PRC company acting as sponsor of a borrower that is wholly owned or controlled by it, provided that such borrower is an investment or holding company.
We set out below a summary of the most notable developments introduced by the New M&A Loan Measures for your reference.
M&A loans for acquisition of minority shareholding interests
Under the Old Rules, M&A loans were permitted only for acquisitions resulting in the borrower (or multiple buyers acting in concert) obtaining ownership or control of the target company.
While the New M&A Loan Measures continue to permit M&A loans for acquisitions that result in ownership or control of the target company ("Controlling Interests M&A Loan"), they now also allow M&A loans to be used for certain minority shareholding acquisitions by a single buyer (but not by multiple buyers acting in concert), as summarized below ("Minority Interests M&A Loan"):
1. Initial minority-interest acquisition
A PRC company may obtain an M&A loan to acquire no less than 20% of the equity interests in a target company, provided that this constitutes the borrower's initial acquisition of the target.
2. Subsequent minority-interest acquisition
Where a PRC company (as borrower or sponsor):
- Already controls the target company
- Already holds no less than 20% of the equity interests in the target company,
it may obtain further financing to acquire an additional no less than 5% equity interest in the target company.
For regulatory purposes, financing under item (i) above continues to be treated as a Controlling Interests M&A Loan, whereas financing under item (ii) is classified as a Minority Interests M&A Loan.
Reduced equity contribution and extended loan tenor
1. Equity contribution requirement
Under the Old Rules, the borrower was required to contribute at least 40% of the acquisition consideration as equity, and PRC banks were permitted to finance up to 60% of the acquisition amount.
The New M&A Loan Measures relax this requirement for Controlling Interests M&A Loans, under which the minimum equity contribution is reduced to 30%. The 40% equity contribution requirement continues to apply to Minority Interests M&A Loans.
2. Loan tenor
The maximum tenor for a Controlling Interests M&A Loan has been extended to 10 years, compared to seven years under the Old Rules. The maximum tenor for Minority Interests M&A Loans remains seven years.
Refinancing of acquisition loans no longer permitted
Under the New M&A Loan Measures, a borrower may obtain an M&A loan only to finance (or refinance) acquisition consideration and related expenses paid by the borrower itself within one year after full payment of the acquisition consideration. However, an M&A loan may not be used to refinance an existing bank loan that was originally borrowed for M&A purposes.
This restriction did not exist under the Old Rules and has been introduced primarily to mitigate financial risks associated with highly leveraged acquisitions.
As a result, where an acquisition was previously financed by way of a bridge loan from an offshore lender, refinancing such bridge financing with a new onshore M&A loan will no longer be permitted, and alternative refinancing structures should be considered.
Conclusion
Overall, the New M&A Loan Measures have been positively received by market participants. They introduce greater flexibility by facilitating minority shareholding acquisitions, while also supporting larger-scale transactions through reduced equity contribution requirements and extended loan tenors. At the same time, the measures reinforce prudential risk control by restricting refinancing of existing acquisition debt.
Should you wish to discuss the New M&A Loan Measures in greater detail or assess their impact on your current or contemplated transactions, please do not hesitate to contact us.
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Grace Li and Shirley Wang, Partners, FenXun, have co-authored this legal update. FenXun established a joint operation office with Baker McKenzie in China as Baker McKenzie FenXun, which was approved by the Shanghai Justice Bureau in 2015.
© 2026 Baker McKenzie FenXun (FTZ) Joint Operation Office. All rights reserved. This client alert/publication/presentation has been prepared for clients and professional associates of Baker McKenzie FenXun (FTZ) Joint Operation Office. Whilst every effort has been made to ensure accuracy, this publication is not an exhaustive treatment of the area of law discussed and no responsibility for any loss occasioned to any person acting or refraining from action as a result of material in this publication is accepted by Baker McKenzie FenXun (FTZ) Joint Operation Office.