China's M&A activities fall in the first half and outbound value drops 13%

Decline due to government's restrictions and tighter scrutiny of cross-border forex transfers

China's merger and acquisition activities cooled in the first half and outbound value fell amid government policy restrictions, PricewaterhouseCoopers said in a report today.

The value of the total M&A deals, including inbound, outbound, and domestic deals, fell to US$283 billion in the first six months from US$355 billion in the second half last year, according to the report.

The value of outbound investment fell 13 percent to US$64.4 billion in the first half year from the second half of last year, but the number of deals rose 8 percent to a record 482.

Roger Liu, PwC China Private Equity leader, attributed the lower value to government restrictions on outbound investment and tighter inspection on cross-border foreign exchange transfers.

“The effects of industrial and foreign exchange restrictions, which started late last year, continued to weigh on the size of outbound M&A deals,” Liu said. “The absence of high profile mega-deals affected the value of M&A activity, but the record high number of outbound deals indicates companies' need for overseas expansion.”

China's State Council last Friday released guidelines to say that the government will limit overseas investments by domestic companies in fields including real estate and sports clubs, while encouraging them to invest in infrastructure and new technology, according to the guidelines.

The Ministry of Commerce reiterated today that government support for overseas investment by Chinese firms will not change, but that oversight of deals will tighten and projects related to the Belt and Road initiative will be given priority.

PwC said that it expected the value of outbound M&A deals to remain subdued in the second half, but both the value and number of deals will far exceed the level in 2014 and 2015.

Data also showed domestic strategic M&A value fell 15 percent to a three-year-low of US$133.1 billion while that

of foreign inbound strategic M&A deals more than doubled to a two-year high of US$6.2 billion.

Special Reports