Chinese M&A Activity Plummets

By Michael Foster, Big4.com Blogger

Mergers and acquisitions in China have swiftly slowed, according to a study by Big4 firm PwC. The study concluded that mainland M&A activity fell by 33 per cent in terms of deal numbers, while total deal value fell 10 per cent.

PwC announced the conclusions of its study on Tuesday, with a warning that the “very surprising” results were worse than what China experienced during the subprime mortgage crisis. This suggests that the worst is still to come to the Chinese economy.

PwC China Private Equity Group Leader David Brown said that the slowdown will likely not abate in the coming months. “These trends will likely continue and the number and size of transactions will grow driven by a number of factors including the increasing experience and confidence of the participants,” he warned at a press conference.

Activity will shift from private equity to domestic banks and investors, Brown said, as a slowdown will afford less valuable opportunities to foreign investors. “Increasing support from Chinese domestic financial institutions and also the private equity industry will also enable buyers to take advantage of opportunities as vendors respond to difficult conditions in their home markets,” he said.

Still, PwC maintains that outbound M&A activity will reach record rates again for 2012, but that the state of inbound and domestic M&A activity depends on improvement in European, American, and mainland economies.