Wealth managers hunting for newly enriched individuals will be encouraged that last year was a banner year for Chinese M&A activity.

Chinese merger and acquisition activity hit record levels last year because of restructuring work in the Asian country’s state-run economy, a new report says. Overall deal values rose 84 per cent year-on-year to reach $734 billion – representing a major source of liquidity events of note for wealth managers.

There were 114 Chinese M&A deals last year that were worth more than $114 billion, a record figure, according to PricewaterhouseCoopers. 

Technology and financial services were particularly vibrant for M&A activity last year, driven by growth expectations and some consolidation.

The rising activity happened at a time when China’s mainland stock market hit the buffers in the summer of last year and has continued to decline amid concerns about decelerating economic growth. However, some of the economic strains may be actually driving M&A action because of firms seeking to gain efficiencies through mergers, disposing of non-core business units, and cutting costs.

M&A activity can be a source of new wealth for some participants and, as such, it is worth the while for wealth managers to track it in pursuit of new clients. For another common liquidity event – IPOs – PwC recently ran data for Hong Kong’s stock market (see here).

“In 2015 we saw a continuation of the outbound trend, with strategic buyers pursuing inorganic growth strategies and seeking technologies and brands to bring back to the China market, as well as significant participation from PEs and financial buyers acquiring overseas assets with a China angle,” David Brown, PwC China and Hong Kong transaction services leader, said.

“There were 40 per cent more outbound deals in 2015, and I believe we will see this kind of rate of growth for the next few years as Chinese-led MNCs start to emerge onto the world stage,” Brown continued. 

China outbound activity grew 21 per cent by value to reach a record high. Privately owned enterprises continued to lead the charge, but financial buyers and private equity firms were also active. State-owned enterprises were relatively subdued in deal terms because domestic priorities in the state sector demand their attention, PwC said.

Private equity and financial investor deals increased 79 per cent by volume and 169 per cent by value. There were 27 such deals in excess of $1 billion (another record) as the trend towards larger deal sizes continued. Domestic investors were especially active, although the focus on domestic A-share markets as an exit route made it a relatively tougher environment for foreign private equity firms.

“We believe that the rate of China M&A activity will continue to grow by more than 20 per cent in 2016,” Brown said. “This will be led by domestic strategic and outbound activity. Technology M&A will stay in the lead, although valuations and growth expectations are increasingly challenging and the pace may be slower than in 2015,” he added.