Mergers and acquisitions are typically important liquidity events.

The value of Chinese mergers and acquisitions – important liquidity events that wealth managers track – fell by 18 per cent in the first half of this year to $264 billion, with trade war worries and a greater focus on the domestic economy weighing on results, according to figures from PricewaterhouseCoopers.

The drop was the largest reported in the past decade, PwC said.

However, deal volumes actually increased in most sectors (including outbound), indicating that there is still reasonable deal flow for smaller transactions, except for private equity which fell sharply by 46 per cent, the report said. 

“With outbound opportunities limited and the trade war in play, China’s renewed focus on its domestic economy drove an increase of domestic strategic M&A both in deals value and volume,” Chris Chan, PwC Hong Kong and Greater Bay Area deals leader, said. “A number of large transactions and reorganisations in the industrials sector were seen in the past six months. In addition, consumer, technology and healthcare appeared to be active.” 

The report indicates an 8 per cent increase in the value of domestic strategic M&A with 28 mega-deals (compared with 18 in the prior six months) and deal volumes climbing by 12 per cent. Foreign inbound investments rose by 64 per cent in volume but declined by 29 per cent in value. 

Private equity and venture capital buyers were far less active. There were 46 per cent fewer transactions in H1 2019; deal value fell by 33 per cent to $87 billion, albeit these numbers are still comparable with 2017 and H1 2016. 

The exit environment for PE remained generally difficult, although there was some increase in activity overall with some “decent IPO conditions” in the first part of the period, PwC said.

PwC predicts “soft” M&A activity into the second half of this year if political and economic uncertainties do not clear.