In 2016, we saw record levels of activity for China M&A, both in terms of deal values and the volume of transactions. The growth in the number of transactions was largely driven by financial buyer activity (+38%) and a 142% jump in outbound M&A. Both categories reached new record highs.
In value terms, China outbound M&A grew by an astounding 246% - nearly 3.5 times the previous record set at the end of 2015. There were 51 outbound transactions valued at over US$1 billion - more than double the previous record.
In terms of deal value by industry sector in the domestic market, M&A in real estate grew strongly to reach new highs. This helped offset declines in technology and financial services, which both came off strong peaks in 2015.
M&A activity driven by financial buyers built on very strong growth in 2015 to hit new records in 2016 - up 38% by volume and 23% by value to US$229 billion. 'Big Asset Management' ('BAM') investors with ample capital dominated the largest transactions. They include corporate and SOE investment arms, financial institutions and government-backed funds.
Financial buyers' involvement in outbound M&A continues to grow extremely strongly - more than doubling in 2016 to over US$38 billion. VC deals also maintained their trajectory - the VC investment market in China is now six times larger than it was 4-5 years ago.
Looking forward, the report concludes that China M&A in 2017 will track 2016 closely, with perhaps even a small decline. This is partly due to new regulations having a slowing effect on outbound M&A. Foreign currency approval is also proving problematic in some transactions. Regulators will continue to scrutinise sectors that are considered non-strategic or where valuations have become very high, such as entertainment.
However, the report argues that outbound investment that is considered to be strategic in nature will continue to be encouraged. The other drivers for this activity will remain in place over the medium to long term. Consequently, PwC believes that outbound M&A will continue to reach new records in 2018.