Number of M&A deals reaches record

The volume of China’s merger and acquisition (M&A) deals surged to a record of 12,790 in 2021, up 21% on a yearly basis, but their value fell 19% from the previous year’s record level to USD637 billion, a report from global accounting firm PwC said. There were 97 mega-deals whose value exceeded USD1 billion each last year, many of which were aligned with key domestic economic themes like industrial upgrade, the dual-circulation development paradigm, and environmental, social and governance (ESG), the report said. The volume of domestic strategic M&As hit a record high of 5,143 in 2021, but the value dropped to the lowest level since 2015, partly due to fewer super-mega deals like those in previous years. “China’s M&As surged in terms of volume owing to the dual-circulation development pattern and ongoing industrial upgrade. The digital economy, green development and domestic consumption will continue to drive M&A transactions in the future,” said Roger Liu, PwC Chinese mainland and Hong Kong Private Equity Leader. He added that the Covid-19 pandemic and geo-political uncertainties will give rise to domestic transaction activities, with corporate reorganizations and changes in strategy being a further driver of M&A deals.

The volume of venture capital investments hit an all-time high in 2021, surging 46% on a yearly basis, and the Shenzhen Stock Exchange and the technology-focused STAR Market of the Shanghai Stock Exchange were still the most popular listing destinations for PE investors, according to PwC. PwC expects China’s M&A deals will likely remain at a high level this year buoyed by the ongoing transformation of the Chinese economy and plenty of capital from financial sponsors. In addition, PE and financial sponsors will continue to play an important role in all aspects of M&As in China.

“Overall, we expect PE investment activities in 2022 to be on a par with or just slightly below the record levels of 2021,” Liu said. Moreover, cross-border M&A deals are expected to remain subdued this year unless there is a relaxation of Covid-19-related travel restrictions, he added. Last year, PE investment accounted for more than half of the total value of M&A in China for the first time, and the value of deals remained at very high levels in high-tech, industrial and consumer goods sectors, said Effie Yang, PwC China Transaction Service Partner, as reported by the China Daily.