Wealth managers tracking liquidity events will be happy that China M&A hit records for both volume and value last year, new figures show.

There were record volumes and values for merger and acquisitions affecting Chinese firms last year, figures from PricewaterhouseCoopers show, a position that will cheer wealth managers who hope M&A will produce a fresh crop of newly-enriched business owners.

The growth in the number of transactions was largely driven by financial buyer activity (up by 38 per cent) and a 142 per cent surge in outbound M&A. Both categories reached record highs, PwC said in a report yesterday. 

In value terms, Chinese outbound M&A grew by 246 per cent, which is almost 3.5 times the previous record set at the end of 2015. There were 51 outbound transactions valued at over $1 billion - more than double the previous record, PwC said. 

“The growth in large outbound deals is offset to some extent by a decline in domestic and inbound strategic M&A,” said David Brown, PwC China and Hong Kong transaction services leader. “Domestic and inbound deals valued at over $1 billion almost halved from 68 in 2015 to 36 in 2016. But this is partly because domestic strategic buyers were looking overseas more for their acquisition targets."  

M&A, along with initial public offerings and the exercise of share options, is a type of liquidity event that wealth managers track for potential clients; organisations such as Wealthmonitor, for example, have provided data exclusively to this publication.

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 hit new records in 2016 – up 38 per cent by volume and 23 per cent by value to $229 billion. “Big asset management” investors with ample capital dominated the largest transactions, the report said. They include corporate and state-owned enterprise investment arms, financial institutions and government-backed funds. 

Financial buyers’ involvement in outbound M&A continued to grow “extremely strongly”, PwC said, and more than doubled in 2016 to more than $38 billion. Venture capital deals also maintained their trajectory - the venture capital investment market in China is now six times larger than it was four-to-five years ago. 

“As in recent years, we see Chinese companies acquiring overseas know-how and brands to bring back to China, as well as looking overseas for inorganic growth,” Brown said. “Privately-owned enterprises have led this charge. They have tripled deal volumes this year and have almost doubled the dollar spend of SOEs - the first time they have overtaken SOEs." 

PwC expects that China M&A in 2017 will track 2016 closely, perhaps with 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, it added.