A Practical Guide to Domestic Companies Successfully Acquiring Hong Kong Companies

A Comprehensive Guide to Successfully Acquiring a Hong Kong Company from Mainland China

In recent years, with the acceleration of global economic integration and the continuous advancement of China’s Going Global strategy, an increasing number of Chinese enterprises have turned their attention to overseas markets. As an international financial center and a free port, Hong Kong has become one of the preferred destinations for mainland companies seeking overseas mergers and acquisitions MA, thanks to its mature legal system, low tax regime, and strong economic ties with the mainland.

According to the 2025 Report on China's Outward Investment and Cooperation Development released by the Ministry of Commerce, total mainland investment in Hong Kong and Macau increased by more than 15% year-on-year in 2025, with a significant rise in the proportion of investments completed through MA. This indicates that acquiring Hong Kong-based companies has become an important path for mainland enterprises to expand globally.

This article aims to provide a detailed practical guide for companies considering cross-border MA, covering areas such as preliminary preparation, legal compliance, tax planning, financing arrangements, and post-acquisition integration. The goal is to help enterprises complete the acquisition process smoothly while ensuring full compliance with applicable laws and regulations.

1. Clarify Acquisition Objectives and Strategic Positioning

Every successful acquisition begins with clear strategic planning. Before deciding to acquire a Hong Kong company, enterprises should first define their strategic intent Is the goal to acquire technology, brand recognition, customer resources, or to gain access to international markets?

For example, in early 2025, a mainland tech company acquired a Hong Kong-based AI startup, successfully obtaining key technology patents and leveraging the startup’s overseas sales channels to enter the Southeast Asian market. This case illustrates that clearly defining acquisition goals and selecting suitable targets accordingly is the first step in the entire acquisition process.

It is advisable for companies to form a professional team-including legal advisors, financial experts, and industry consultants-at the initial stage to conduct market research and target screening. Preliminary due diligence can also be assisted by third-party institutions such as law firms and consulting agencies.

2. Legal Compliance Review Ensuring Transaction Security

Given the involvement of cross-border capital flows and different legal jurisdictions, legal compliance must be a top priority during the acquisition process.

First, it is essential to verify the legal structure, shareholder composition, asset status, and potential liabilities of the target company. According to the Companies Ordinance and other relevant laws in Hong Kong, acquirers need to review documents such as the company’s incorporation files, articles of association, and board resolutions.

Secondly, attention should be paid to whether the target company is involved in ongoing litigation, intellectual property disputes, or labor conflicts. For instance, at the end of 2025, a mainland enterprise discovered multiple employee arbitration cases involving a Hong Kong retail company before finalizing the acquisition and ultimately decided to abandon the deal to avoid potential risks.

Mainland enterprises must also comply with regulations set by the National Development and Reform Commission NDRC and the Ministry of Commerce regarding overseas direct investment ODI filings. Since 2025, the government has strengthened scrutiny on the authenticity of outbound investments, requiring more detailed documentation on funding sources and business plans.

3. Tax Planning Optimizing the Deal Structure

Tax costs are often a critical factor affecting overall returns in cross-border MA transactions. Hong Kong adopts a territorial taxation principle, meaning only profits sourced from Hong Kong are taxed, and the corporate income tax rate is only 16.5%, making it highly attractive to mainland investors.

In structuring the transaction, companies may consider setting up an offshore holding company as the acquisition vehicle to benefit from bilateral tax treaties. For instance, if a mainland parent company directly acquires a Hong Kong firm, it may face withholding tax issues. However, establishing an intermediary holding company in a third jurisdiction such as Singapore or the British Virgin Islands BVI can help reduce the overall tax burden.

It is worth noting that in 2025, the State Taxation Administration issued new regulations on transfer pricing for cross-border related-party transactions, requiring more extensive disclosure of related-party information. When engaging in tax planning, it is crucial to assess regulatory trends and ensure that the transaction structure remains legally sound and reasonable.

4. Financing Arrangements Ensuring Liquidity

The availability of funds is a key determinant of whether an acquisition can be completed successfully. Typically, companies can raise funds through internal reserves, bank loans, equity financing, or a combination of these methods.

For large-scale MA deals, it is advisable to communicate with financial institutions early to develop tailored financing solutions. In recent years, many Chinese banks have introduced specialized financial services for cross-border MA, including syndicated loans, domestic guarantees for offshore loans, and structured financing, providing diversified funding options.

For example, in the first quarter of 2025, a mainland manufacturing group acquired a Hong Kong-listed parts supplier using a combination of internal funds and a syndicated loan from a domestic bank. This approach helped control leverage while ensuring timely access to capital.

Companies must also pay attention to foreign exchange controls. While the State Administration of Foreign Exchange continues to support genuine and compliant overseas investments, appropriate approval procedures must still be followed to ensure legal and compliant capital outflows.

5. Closing Execution and Post-Acquisition Integration Ensuring Smooth Transition

After completing due diligence, signing agreements, and obtaining necessary regulatory approvals, the formal closing phase begins. During this stage, coordination among multiple intermediaries is required to ensure smooth completion of share transfers, fund transfers, and public disclosures.

However, the more critical aspect lies in post-acquisition integration. Many MA failures result from poor integration. After the acquisition, companies should focus on the following areas

Management Adjustment and Cultural Integration Whether to retain the existing management team and how to align corporate cultures.

Business Synergy and Resource Integration How to leverage strengths from both sides to enhance operational efficiency.

IT Systems and Financial Unification Achieving data interoperability and consolidated financial reporting for centralized management.

For instance, in 2025, a mainland e-commerce company acquired a Hong Kong logistics firm and quickly integrated the logistics network and delivery systems, achieving efficient cross-border supply chain collaboration and significantly improving service capabilities and market competitiveness.

Conclusion

Acquiring a Hong Kong company from mainland China is a systematic endeavor that requires comprehensive planning and meticulous execution across strategic, legal, tax, financial, and integration dimensions. In an era of increasingly fierce global competition, only enterprises with forward-looking vision and professional execution capabilities can truly realize value creation through cross-border MA.