M&A 2018 mid-year review & outlook

August 2018

The value of China M&A fell by 18% in the first six months of 2018 to US$348 billion, despite a slight increase in the volume of transactions. Deal values fell across the four main sub-sectors of M&A: domestic strategic buyers, foreign strategic buyers, PE deals and China mainland outbound. Domestic strategic M&A declined 27% in value. Nevertheless, deal volumes were still the second highest on record.

Looking at geographical regions, Europe displaced Asia as the primary outbound destination in terms of value. However, two deals (China Three Gorges’ US$10.8 billion acquisition of EDP Energias de Portugal and Geely’s US$9 billion investment in Daimler) accounted for 80% of the Euro-zone total. Looking over a longer period, it is apparent that falling investments into the US accounts for a significant proportion of the overall decline in China outbound M&A from the peak in the first half of 2016.


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Domestically, strategic M&A was down 27% by value, with 24 ‘mega-deals’ (valued over US$1 billion) compared to 32 in the second half of 2017. To some extent the slowdown reflects the Chinese government’s commitment to deleveraging, which has had some impact on M&A, particularly among listed companies.

In the financial buyers sector, fund-raising by traditional PE has remained robust and venture capital activity reached a new six-month record in terms of value. The value of investments by PE and financial buyers in outbound M&A declined in line with the overall trend. But the number of overseas transactions actually increased – PE funds remain active and interested in outbound opportunities, and their access to USD financing will be an advantage.

The first half of 2018 also saw a significant decrease in exit activities for PEs. Regulators controlled the numbers of IPOs in this period, seeking to improve the quality of applicants and reduce market volatility. Exits via trade sales also declined, as listed company buyers tightened their belts amid a deleveraging environment.

PwC expects a further moderate decline in M&A in the second half of the year. China outbound will continue to slow, but the other sectors (domestic, foreign and PE) are likely to remain steady.

Contact us

Wai Kay Eik

Mainland China and Hong Kong Managing Partner - Deals, PwC China

Tel: +[852] 2289 2199

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