Chinese M&As fall from record in 2016 but activity expected to rise in 2018
Chinese mergers and acquisitions last year fell from a record in 2016 but PwC says it sees an overall positive trend in 2018.
The value of Chinese M&As fell by 11 percent and the number of deals dropped 14 percent last year from the record highs of 2016. However, the total value of deals at US$671 billion was roughly equal to that set in 2015.
This was largely attributable to a reduction of outbound deals from the Chinese mainland, according to PwC's report released today.
But the overall total was helped by a 14 percent increase in the value of domestic strategic deals, which refer to a company being bought to integrate it into an existing business.
"While deals are down by both value and volume compared to a bumper 2016, the trend is still strongly upward on a five-year view," said Weekley Li, transaction services partner of PwC China.
"The number of deals was the second highest ever, as all the main drivers of M&A activity were still in place," he said.
But the number of mega deals valued at over US$1 billion declined from 103 in 2016 to 89 last year due to a reduction in Chinese outbound deals .
"The government’s policy guidance on outbound deals has had an undoubted effect," Li said. "There has been a re-focusing on strategic outbound deals and away from passive or trophy assets. That said, the total value of outbound deals still exceeded that of 2014 and 2015 combined."
Technology, industrial and consumer products continued to be the main sectors targeted in outbound deals, according to PwC.
Looking forward, the report expects M&A activity to increase in 2018 to a level close to or possibly exceeding that in 2016.
"With better policy clarity, outbound M&As will resume their growth trend, " Li said.
Separately, private equity and venture capital fund-raising grew strongly in 2017. The Asset Management Association of China reported US$1.5 trillion of assets under management by PE funds at the end of 2017, up seven folds over the last three years.