Outbound Salon Series: Investing in the US 2019 - New trends and solutions

“PwC Outbound Salon Series: Investing in the US 2019” has successfully launched on 3rd and 5th of December and in Beijing and Shanghai respectively. It attracted more than 100 representatives from different companies and organizations to participate in two locations. Professions from PwC China and PwC US shared new opportunities for companies to invest in the United States.

Andrew Li, PwC China Deals Domestic Leader, said, "The current trade friction is not the end of China's outbound investment to the US market. Although there is adjustment in the medium and long term, the participation of economic entities of both parties cannot be underestimated. The vitality of the investment trading market is still there."

Jenny Chong, PwC Asia Pacific International Tax Services Leader, said, "In the past six months, many Chinese companies have been paying close attention to the changes in the investment environment brought about by Sino-US trade friction. The consultation time in the next three months is crucial. To some extent, it will determine the direction of the next step of Chinese companies' overseas mergers and acquisitions."

Overview of the US Cross-border M&A environment

Overall, deal market remains robust, despite high valuations being a challenge for all investors.

  1. Deal values: Values remain up in 2018 (+45% vs. YTD Sept-2017) as a result of significant megadeals, as companies in several sectors drive to vertically integrate and improve scale.
  2. Deal volumes: Aside from a spike in Q1-18, deal volume has declined since Q1-18. Q3-18 volume was 22% lower than Q3-17 and is down 15% YTD, reflecting a difficult valuation environment and
    other headwinds.
  3. Corporate/private equity: Corporate M&A values are up 50% YTD, due in part to megadeals; volume is down 19%. PE deal volume has been more stable, down only 2% YTD, while values are up 23%.
  4. Cross-sector deals: Cross-sector deals have regularly constituted more than one-third of US M&A in recent years. Media/telecom, tech, consumer and pharma are top targets in ‘18.
  5. Cross-border deals: While values are up 23% YTD due to megadeal activity, volumes have declined (-10%), primarily due to changes in the business and regulatory environment.

According to PwC, the investment strategy of Chinese companies to the US is evolving to focus on the following "three new":

1. New Sectors/New Targets

  • Multidimensional diversification (geography, income source, sector, etc.) 
  • More strategic middle-market sector specific play

2. New Business Models

  • Optimizing supply chain globally
  • Embracing US based funding sources, investors and exit options

3. New Approach

  • Integrating regulatory and tax planning into business planning
  • Considering greenfield and JV/alliances as an alternative solution

Contact us

Gabriel Wong

Head of China Corporate Finance, Inbound/Outbound Leader, Belt & Road Leader, PwC China

Tel: +[86] (21) 2323 2609

Andrew Li

Head of China and Hong Kong Transaction Services, PwC China

Tel: +[86] (21) 2323 3437

Jenny Chong

Partner, PwC China

Tel: +[86] (21) 2323 3219

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