Merger-and-acquisition deals on the Chinese mainland remain flat in volume, with 6,173 transactions reported in the first half of 2022. However, the total value of the transactions fell to a historic low of $236.7 billion because of a slump in the volume of “mega-deals”.
“Domestic M&A transactions declined in the first half of the year, and there is little prospect of a significant rebound in the short term,” said David Brown, PwC deals leader for Asia Pacific.
Domestic M&A transactions declined in the first half of the year, and there is little prospect of a significant rebound in the short term. However, investor sentiment is still strong, and activity in certain segments remains high.
David Brown, PwC deals leader for Asia Pacific
“However, investor sentiment is still strong, and activity in certain segments remains high,” he said. If some adverse factors such as COVID-19, weak stock markets, and regulatory and geopolitical concerns can ease, investor confidence will gradually recover, he added.
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Brown stressed that investors’ willingness to invest remained strong, with active trading activities in some sectors. “The M&A demand remains high, but the fall in value and softened equity-market performance brought challenges for asset sales, and many deals are still waiting for a good time, especially mega-deals involving more than $1 billion,” he said.
According to the firm, the first half saw only 22 mega-deals valued over $1 billion, less than half the number in the second half of 2021.
The report also shows that the domestic strategic M&As remained active for the first sixth months of this year, with more than 2,400 deals. Smaller deals are still being fueled by key domestic drivers, such as industrial upgrades, and by high-tech sectors, while some mega-deals focus on the State-owned enterprises’ industrial upgrades, recapitalization, and integration.
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Chris Chan, PwC’s Chinese-mainland and Hong Kong financial services deals leader, said that various factors, including weak stock and property markets, have inhibited what was an active M&A environment. “Unless some of these adverse factors are alleviated, inbound and outbound M&A transactions will remain subdued in the second half of the year,” he said.
Nevertheless, he forecast that more mega-deals might be seen by the end of this year, as some of them might start trading procedures after the 20th National People’s Congress.
