China’s M&A transaction value surged 45% in H1 2025, led by strategic domestic investments: PwC report

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Hong Kong, 25 August 2025 – China’s M&A transaction value reached more than US$170bn in the first half of 2025, led by a surge in domestic strategic deals. This is an increase of 45% year on year. Transaction volumes also continued their steady recovery. With SOE reforms accelerating, multinationals reshaping their portfolios, and private equity funds poised for a wave of exits, PwC expects China’s M&A transaction value to achieve strong double-digit growth for the whole of 2025. These are among the findings in PwC’s M&A 2025 Mid-Year Review and Outlook, which is released today.

In the first half of 2025, domestic strategic M&A activity intensified. Deal value more than doubled year-on-year to over US$100bn. There were 20 mega-deals (> US$1bn), significantly exceeding the same period last year. Analysis by sector shows that high-tech (semiconductors in particular), as well as healthcare and industrials have become the dominant areas for mega-deals, echoing national strategic priorities. Financial services also performed well, with one mega-transaction becoming a headline event in the first half of the year.

Jeremy Ngai, PwC China South and Hong Kong Tax Leader, M&A Tax Leader, said: “The continued upsurge in domestic strategic deals is the result of a confluence of positive factors. In particular, the launch of DeepSeek AI in early 2025 not only injected new vitality into the high-tech sector but also led to positive changes in the overall economic environment. Meanwhile, the rebound in valuations in Hong Kong’s capital market and the recovery in IPOs have created a favourable financial environment for M&A activity. The value chain integration of A-share listed state-owned enterprises in some core industries has further boosted the M&A market.”

Venture Capital deals were a major highlight of the first half of the year. Driven by investments in emerging technology sectors such as AI and robotics, VC deal volumes continued to grow, maintaining a long-term historic high. Meanwhile, private equity fund exits also showed strong growth. With positive economic trends and rising market sentiment, investors actively sought exit opportunities and realised capital appreciation through M&A transactions. According to the report, M&A transactions have become the primary exit option for private equity funds, accounting for the largest proportion. Exits through listing on the Hong Kong Stock Exchange are also showing positive momentum and are on track to deliver their strongest year in a decade.

While outbound M&A by Chinese Mainland companies remained weak in the first half of 2025, signs of recovery have been observed. Three mega-deals were completed during the period, all in major European markets such as the UK, Germany, and France, with transaction value up on the same period last year. Europe remains the most important overseas investment destination for Chinese Mainland companies in terms of transaction value.

Looking ahead, several positive factors will drive continued growth in M&A activity in the second half of the year. These include some positive signs of economic improvement in China, such as rising capital market valuations. Another driver is pent-up M&A demand and a growing inventory of private equity projects awaiting sale, as investors have gradually regained confidence in the technology sector, due to advances in AI and robotics. A-share listed companies are also using M&A to pursue growth and acquire new capabilities.

Stronger Hong Kong capital market performance will also lift valuations and open exit channels. Meanwhile, overseas investment demand is growing, particularly in Southeast Asia, with China remaining a popular investment destination. Multinationals are re-evaluating their China strategies and structures, potentially triggering additional deal flow. M&A deals driven by SOE reform will continue to advance, leading to large-scale mergers and restructurings.

“With a sizeable backlog of M&A demand and PE exits, together with the rebound in capital market sentiment, China’s M&A market is expected to become more active in the second half of the year. Transaction value for the whole of 2025 could achieve strong double-digit growth compared with 2024,” Thomas Crasti, PwC Hong Kong M&A Advisory Partner, concluded.