Hello everyone! Recently, many friends have been asking about acquiring licensed financial companies in Hong Kong (particularly Types 1/2/4/5/6/7/9 licenses). They keep asking me: “Can we really get the license quickly through these deals? Aren’t the intermediary fees too high? How do we know if the target company’s compliance is good?” Let me share my experience to help you avoid potential pitfalls and feel more confident before making an acquisition!

1. Why Do Market Prices Often Show “Two Different Prices for Buying and Selling”?

• Different Prices for Buyers and Sellers: It’s common to see buyers paying HKD 3 million for a licensed corporation, while sellers only receive HKD 1.5 million. The remaining HKD 1.5 million goes to various intermediaries and service providers.
• Multiple Layers of Intermediary Fees: In Hong Kong’s license trading circle, intermediaries are very common. Some provide resources, some provide matching services, and others provide subsequent compliance services. Sometimes there are up to fourth or fifth-hand intermediaries, and you have no idea how much you’re actually paying in “intermediary fees.”
• Lack of Transparency, Volatile Prices: If you’re unfamiliar with the market, multiple layers of introducers might inflate prices, which explains why we often see such large price variations for “the same license.”

Key Takeaway: For buyers, it’s crucial to understand the true “market price” range and identify how many intermediaries are involved, distinguishing between those who provide actual services and those who are merely “introducing” parties. Always compare multiple options!

2. Be Careful with Multiple Intermediaries in the Transaction Process

• Negotiate Intermediary Fees Upfront: Many people sign various agency or intermediary agreements without understanding the specific fee structure. The “hidden fees” that surface later can be shocking!
• Watch Out for Conflicts of Interest: Some intermediaries just want to close deals quickly, without caring about your subsequent compliance risks. Buyers must clearly communicate their real needs (such as asset management or securities brokerage) before acquisition, or the company they buy might be completely different from what they imagined.

Key Takeaway: Before engaging intermediaries, clarify their role: do they directly own company resources, or are they just middlemen? How are fees calculated? Otherwise, you might end up paying unnecessary costs and feeling frustrated.

3. What Are the Key Points in Valuation?

1. Company Operating History
   • “Clean” License Companies with No Business: Usually cheaper, with simpler due diligence.
   • Companies with Operations and Revenue: Can be used immediately but require careful examination of historical debt or compliance penalties.
2. Compliance Record
   • Any SFC warnings or penalties? How professional is the management team and ROs?
   • These factors significantly impact final price negotiations.
3. Market Demand and Policy
   • When mainland capital seeks Hong Kong asset management licenses (Type 9), prices tend to rise.
   • Tighter regulations can increase the value of existing companies.

Key Takeaway: Don’t just look at the price! Often, unusually low-priced licenses might hide compliance issues or business “red flags.” Professional due diligence is crucial!

4. Current Market Conditions

• Type 1 License (Securities Trading): Generally ranges from HKD 1.5-3 million, potentially higher with business revenue.
• Types 4 and 9 Licenses (Investment Advisory & Asset Management): Trading range approximately HKD 1.2-2.5 million, depending on additional licenses (like Type 5 futures license) and operational status.
• Other Categories (Types 2/5/6/7): Lower trading volume, but prices can surge with demand.

Key Takeaway: Actual transaction prices often depend on the license’s “cleanliness,” company background, operational status, and number of intermediary layers. Always compare multiple sources for quotes.

5. New Application vs. Acquisition: How to Choose?

• New License Application
  • Complex procedures, typically taking 6-12 months, but results in a clean slate with no historical issues.
• Acquiring Existing License
  • Faster to “get started,” especially if the company has existing clients and revenue.
  • Must thoroughly review past financial records, compliance history, litigation, employee contracts to avoid problems.

Key Takeaway: Some people think “acquisition is faster” — but if the target company’s situation is complex, due diligence and subsequent rectification might be more tiresome than a new application. Consider your time, funds, and business plans before deciding.

6. Transaction Considerations

1. Intermediary Fees Are Substantial
   • Multiple layers of intermediaries can exceed your budget. Best to agree on fixed prices or clear percentages to avoid last-minute “additional charges.”
2. Compliance, Compliance, Compliance
   • Hong Kong SFC is very strict on compliance. Post-acquisition, you need to maintain a compliance team and find suitable ROs. Without proper planning, you might have a license but cannot conduct actual business.
3. Thorough Due Diligence is Essential
   • Don’t just look at the seller’s “official documents.” Many crucial issues (contracts, litigation, employee disputes) lie “beneath the surface.”
4. Post-Transaction Integration/Handover
   • Should the old management stay?
   • For operating companies, how to transfer client information? Who’s responsible for contract renewals?
   • These must be agreed upon before the transaction to avoid later disputes.

7. Summary: Steps Before Buying

• Confirm Objectives: Are you seeking quick license acquisition for business operations, or just “reserving a spot”? Do you have clear operational plans?
• Clarify Intermediaries and Fees: Finding reliable intermediaries or direct resources can save trouble and increase transparency.
• Due Diligence + Compliance: Do thorough homework. Better to spend more time and money on lawyers/accountants than face major issues later.
• Transaction Structure Design: One-time payment or installments? Any performance guarantees? Retain original management team for transition?
• Operational Budget: Buying the license is just the start. Factor in ongoing compliance costs, RO salaries, rent, etc.

8. Additional Considerations

• Finding Responsible Officers (ROs)
  • Hong Kong SFC values RO qualifications and experience highly. Without suitable candidates, you can’t conduct actual business even with a license.
• Multiple vs. Single License
  • Multiple licenses seem to offer broader business scope but have higher compliance costs and more conflicts; must evaluate your team’s capabilities and resources.
• Macro Environment
  • Will future regulatory tightening or cross-border business restrictions affect your expected business strategy?
• Future Marketing and Client Sources
  • How to develop clients after obtaining the license? Is mainland business integration smooth? Consider these in advance.

Final Tips:

1. Compare multiple channel quotes, don’t just seek convenience.
2. Try to sign clear intermediary or consultant agreements to ensure transparent and controllable fees.
3. Engage professional teams for due diligence — carefully review compliance, financial, and legal aspects!

I hope this article provides helpful insights for those preparing to acquire licensed companies in Hong Kong. If you have questions about specific processes, compliance details, or RO recruitment challenges, feel free to comment below for further discussion! Best wishes for successfully obtaining your desired license, let’s work hard together!