SOURCE / ECONOMY
China’s M&A drops 18% in H1, rebound likely in 2020: report
Published: Aug 19, 2019 06:08 PM
The value of mergers and acquisitions (M&A) done by Chinese companies fell by 18 percent in the first half of 2019 to $264 billion, registering the largest six-month decline in the last decade. Rebound is likely to occur in 2020, according to an industry report released on Monday.

The decline in deal values was driven by steep falls in outbound and private equity (PE) deals, mitigated by some rise in domestic M&A, said the report by global consultancy firm PwC.

Deal volumes actually increased in most sectors, indicating that there is still reasonable deal flow for smaller transactions, except for PE which fell sharply by 46 percent, it noted.

"Sector activity was fairly broadly spread, with high technology investments remaining in the No.1 position in volume terms, as China's big technology companies were active buyers in this sector," said Effie Yang, PwC China Deals North Private Equity Leader. 

"Although the fall-off of investment into the US has been in play for several years already, in the first half of 2019 there was a sharp decline in investment into Europe as well, with Asia the only destination region holding up at prior norms," Yang said.

PwC forecast that if the current uncertainties do not clear, soft M&A activities will extend to the second half of 2019. Domestic, strategic M&A may be the one relative bright spot with China focused on stimulating its domestic economy, the firm said.

"Multiple factors are weighing on outbound M&A from China," said George Lu, PwC Mainland China and Hong Kong Outbound Deals Leader and North Transaction Services Leader. 

"If there are favorable developments on these factors, we do anticipate some rebound in 2020 as the fundamental drivers of Chinese outbound M&A remain in play. But we think that political scrutiny of large cross-border M&A will persist as nations protect strategic assets and this will reduce the number of mega-deals," Lu added.