The China Securities Regulatory Commission has terminated the review of 129 companies applying for initial public offerings out of 628 companies in line for approval on Aug 7, according to a report by Moneyweek.

The terminations mean about 270 private equity and venture capital institutions with stakes in those companies cannot exit by IPO and have to look for an alternative exit strategy.

Of the 129 companies, online game operator Beijing Kylin Culture Co Ltd ranked first in terms of the number of investors with 13 PE and VC institutions, followed by Dalian Wanda Commercial Properties Co Ltd and Chongqing Qinchuan Industry (Group) Co Ltd, each with 11 PE and VC institutions, according to financial data provider Shanghai Wind Information.

The companies terminated are in sectors such as agriculture, material, entertainment, construction and auto parts.

Shenzhen Capital Group Co Ltd had five invested companies whose IPO reviews were terminated, the most among 270 institutions, followed by Ping An Insurance (Group) Co of China Ltd's PE arm and Shenzhen Oriental Fortune Capital Co Ltd.

As PE and VC companies find it more difficult to exit by IPO, they will seek a merger and acquisition strategy as an alternative.

Shenzhen Co-win Venture Capital Investments Ltd invested in the Nancheng Department Store in the Guangxi Zhuang autonomous region in 2007 and the company failed to go public in 2011.

In May this year, Co-win Venture Capital sold its stake to Better Life Commercial Chain Share Co Ltd and gained an investment return of 115 million yuan ($18.7 million).

Of the merger and acquisition deals reported in China, in July, 12 were backed with PE and VC firms, with a deal value of $2.9 billion, accounting for 14 percent of the total amount, according to data from ChinaVenture Group.

"As IPO is suspended for more than a year, the IPO-dominated exit condition has been changed, and M&A becomes a popular way to exit," said Zhang Qi, an analyst at Zero2IPO Group.

Zhang said that an IPO exit poses many uncertainties, and an M&A exit can be easier as long as the buyer likes the acquired party.

"So PE and VC investors will choose an M&A strategy to exit when their invested companies are still at the early development stage, or they want to cash out immediately," said Zhang.

According to Zhang, China's third national equity exchange and an over-the-counter market National Equities Exchange and Quotations will be another means for PE and VC institutions to exit.

The market maker system of National Equities Exchange and Quotations is due to go online this month and listed companies at NEEQ may go public at the ChiNext Board, China's Nasdaq-style market.

Second batch of IPO applications waiting approvals, CSRC says	CSRC urges shift in listings to OTC