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PwC M&A 2017 Review and2018 Outlook
David Brown, Transaction Services Leader, PwC China and Hong Kong
Christopher Chan, Advisory Partner, PwC China and Hong Kong
23 January 2018
www.pwc.com
PwC
• The data presented is based on information compiled by ThomsonReuters, ChinaVenture, AVCJ and PwC analysis unless stated otherwise
• Thomson Reuters and ChinaVenture record announced deals. Some announced deals will not go on to complete
• The deal volume figures presented in this report refer to the number of deals announced, whether or not a value is disclosed for the deal
• The deal value figures presented in this report refer only to those deals where a value has been disclosed (referred to in this presentation as “disclosed value”)
• “Domestic” means China including Hong Kong and Macau
• “Outbound” relates to mainland China company acquisitions abroad
• “Inbound” relates to overseas company acquisitions of Domestic companies
• “Private Equity deals” or “PE deals” refer to financial buyer deals with deal value over US$10mn and/or with undisclosed deal value, mainly invested by private equity GPs but also including direct investments by financial institutions and conglomerates which are of the nature of private equity type investing
Foreword — explanation of data shown in this presentation (1 of 2)
2
PwC
Foreword — explanation of data shown in this presentation (2 of 2)
• “VC deals” refer to financial buyer deals with deal value less than US$10mn and/or with undisclosed value, but invested by venture capital funds
• “Financial buyer” refers to investors that acquire companies with the objective of realizing a return on their investment by selling the business at a profit at a future date and mainly, but not entirely, comprises PE and VC funds
• “Strategic buyer” refers to investors that acquire companies with the objective of integrating the acquisition in their existing business
• In order to exclude foreign exchange impact, deal values from 2013 to 2016 were adjusted based on 2017 average Rmb/US$ exchange rate
3
PwC
Overview
PwC
2017 China M&A fell 11% to US$671bn off the record highs of 2016, as China pursued a more strategic approach to outbound M&A
5
* Financial buyer-backed China mainland outbound deals are also included in private equity deals, but they are not double counted in the total
deal volume and deal value in the table above
** US$43 bn ChemChina-Syngenta deal is included in 2016 outbound value
Source: ThomsonReuters, ChinaVenture and PwC analysis
Total deal volume and value, from 2013 to 2017
*
*
Volume Value Volume Value Volume Value Volume Value Volume Value
Strategic buyers (US$bn) (US$bn) (US$bn) (US$bn) (US$bn)
Domestic 2,7 04 1 35.7 4,1 80 221 .6 4,821 41 4.7 4,87 0 327 .3 5,1 1 1 37 3.8 5% 14%
Foreign 27 5 1 3 .8 354 21 .8 31 6 1 3 .3 27 1 6.9 255 1 4.2 -6% 105%
Total Strategic buyers 2,979 149.6 4,534 243.5 5,137 428.0 5,141 334.2 5,366 388.0 4% 16%
Financial buyers
Priv ate Equity 392 33 .0 593 66.6 1 ,062 1 7 6.6 1 ,7 67 21 9.0 1 ,324 1 7 9.8 (25%) (18%)
VC 7 38 0.8 1 ,334 1 .3 2 ,7 35 4.1 3 ,492 5.8 2 ,338 3 .1 (33%) (46%)
Total Financial buyers 1,130 33.8 1,927 67.8 3,797 180.7 5,259 224.8 3,662 182.9 (30%) (19%)
China mainland Outbound
SOE 55 35.8 7 8 25.4 7 9 23 .6 1 1 6 65.3 1 01 27 .9 (13%) (57%)
POE 1 1 8 1 0.4 1 45 1 3 .3 207 20.7 609 1 06.0 467 59.4 (23%) (44%)
Financial buy ers 25 1 .0 49 1 3 .0 94 1 2.7 1 95 37 .4 238 34.1 22% (9%)
Total China mainland Outbound 198 47.2 272 51.8 380 57.0 920 208.7 806 121.4 (12%) (42%)
HK Outbound 164 8.8 215 20.4 199 24.5 282 23.2 243 12.8 -14% -45%
Total 4,446 238.4 6,899 370.4 9,419 677.5 11,407 753.5 9,839 671.0 -14% -11%
% Diff
vol.
2017
vs.
2016
% Diff
val.
2017
vs. 2016
2015 201620142013 2017
**
PwC
2,704
4,180 4,821 4,870 5,111
392
593
1,062 1,767 1,324
198
272
380
920 806
275
354
316
271 255
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2013 2014 2015 2016 2017
Deal volume by main category (excludes VC)
Domestic Strategic Buyers Private Equity Deals China Mainland Outbound Foreign Strategic Buyers
Deal volumes declined by 14% overall, but the number of transactions was still the second highest ever annual total, and domestic strategic deals rose by 5% to a new record
6
* 238 financial buyer-backed outbound deals are also recorded in private equity deals
Source: ThomsonReuters, ChinaVenture and PwC analysis
No.
*
*
PwC
135.7 221.6
414.7 327.3
373.8 33.0
66.6
176.6
219.0 179.8
47.2
51.8
57.0 208.7
121.4
13.8
21.8
13.3
6.9
14.2
0
100
200
300
400
500
600
700
800
2013 2014 2015 2016 2017
Deal value by main category (excludes VC)
Domestic Strategic Buyers Private Equity Deals China Mainland Outbound Foreign Strategic Buyers
Deal values also declined for outbound, foreign inbound, and financial-buyer deals, but domestic strategic deals increased by 14% with some large transactions in the real estate sector
7
US$ billion
* US$34.1bn of financial buyer-backed China mainland outbound deals are also recorded in private equity deals
** US$43 bn ChemChina-Syngenta deal is included in 2016 outbound value
Source: ThomsonReuters, ChinaVenture and PwC analysis
*
*
**
PwC
19 27
67
34 39 5
9
27
19 19
18
18
19
48 28
3
1
2
3
0
20
40
60
80
100
120
2013 2014 2015 2016 2017
Number of deals with value > US$ 1 billion
Domestic Strategic Buyers Private Equity Deals China Outbound Foreign Strategic Buyers
There were fewer mega-deals (> US$1bn) in 2017 compared to the previous two years, in particular reflecting the tightening and rationalization of outbound activities by government authorities
8
Source: ThomsonReuters, ChinaVenture and PwC analysis
No.
PwC
Strategic buyers
9
PwC
Source: ThomsonReuters, ChinaVenture and PwC analysis
Domestic strategic deal volumes reached a new high in 2017 – continuing an unbroken year-on-year track record of increases. Part of this increase can be attributed to some buyers refocussing on internal transactions due to headwinds around outbound activity; deal values increased by 14% on 2016, largely due to strong activity in the real-estate sector
275 354 316 271 255
2,704
4,180
4,821 4,870
5,111
13.8 21.8 13.3 6.9 14.2
135.7
221.6
414.7
327.3
373.8
0
50
100
150
200
250
300
350
400
450
500
0
1,000
2,000
3,000
4,000
5,000
6,000
2013 2014 2015 2016 2017
Strategic buyer deals, from 2013 to 2017
Announced Deal Volume Inbound Announced Deal Volume Domestic
Announced Deal Value Inbound Announced Deal Value Domestic
No. US$ billion
10
PwC
Real estate M&A hit a record high, mainly because of unbalanced regional development, policy constraints and funding restrictions, which encouraged market consolidation in the sector; industrials, technology, FS and consumer were also active
19.1 27.5 54.1 56.6 57.9 27.4
40.4
39.1 52.6
108.5
19.7
33.9
72.1 45.2
47.1
12.0
32.3
66.3 43.8
44.5
21.5
33.8
49.1
41.5
36.3
11.5
15.8
48.3
18.1
22.6
29.9
18.9
12.4
18.8
26.2
41.0
43.1
34.7
13.8
21.1
28.3
14.3
24.0
0
50
100
150
200
250
300
350
400
450
2013 2014 2015 2016 2017
Strategic buyer deal value by industry sector
Industrials Real Estate High Technology Financials Consumer Energy and Power Healthcare Materials Others
US$ billion
11Source: ThomsonReuters, ChinaVenture and PwC analysis
PwC
PE/VC and financial buyer deals
12
PwC
Fund-raising by traditional PE remained strong – but these figures do not take into account huge volumes of available capital from alternative financial investors (so-called “Big Asset Management” or “BAM”) comprising: corporate and SOE investment arms/captive-PEs, financial institutions, and government-backed funds; the Asset Management Association of China reported US$1.5tn of assets under management by private equity funds in China at the end of 2017 – a nearly 7-fold increase over the last 3 years
13
Source: AVCJ and PwC analysis
19.429.2
15.0 9.3
29.6
13.0
21.2
29.1
91.8 50.6
130140
163
103
283
0
50
100
150
200
250
300
0.0
20.0
40.0
60.0
80.0
100.0
120.0
2013 2014 2015 2016 2017
PE/VC fund raising for China investment
Non Rmb fund size Rmb fund size Fund volume
No.US$ billion
PwC
Financial buyer investment activity declined from the boom year of 2016, but both domestic and foreign PEs were active, with deal volumes still 25% higher than in 2015
392 593
1,062
1,767
1,324
33.0
66.6
176.6
219.0
179.8
0
50
100
150
200
250
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2013 2014 2015 2016 2017
Financial buyer deals*, from 2013 to 2017
Announced Deal Volume Announced Deal Value
No. US$ billion
14
Source: ThomsonReuters, ChinaVenture and PwC analysis
* Financial buyer-backed China mainland outbound deals are also included in the above numbers / VC not included
PwC
Technology and real-estate related investment activity remain most important for financial buyers, accounting for 43% by value compared to 32% in 2016
15
Source: ThomsonReuters, ChinaVenture and PwC analysis
Financial buyer deal value* by industry sector, from 2013 to 2017
* VC not included (comprises a further US$3.1bn of mainly tech-sector investment)
12.4
69.2
41.8 45.0
4.0
8.7
18.4
40.8 28.3
15.8 30.1 33.5
23.8
19.4
31.2 24.7
2.5
22.8
19.7
12.3
1.3
2.4
5.4
19.1
5.6 8.5
11.0
12.1
10.6
5.3
17.0
25.3
18.3
0
20
40
60
80
100
120
140
160
180
200
220
2013 2014 2015 2016 2017
High Technology Industrials Real Estate Consumer Financials Media and Entertainment Healthcare Others
US$ billion
PwC
Venture capital players, although still highly active, also declined off prior year peaks
16
738
1,334
2,735
3,492
2,338
0.8
1.3
4.1
5.8
3.1
0
1
2
3
4
5
6
7
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2013 2014 2015 2016 2017
Venture Capital deals volume, from 2013 to 2017
Announced Deal Volume Value
No.
Source: ThomsonReuters, ChinaVenture and PwC analysis
US$ billion
PwC
The much anticipated step-up in exit activity was seen for the first time in 2017, with a record number of both IPO and trade-sale exits
35
114 119 165
281
59
81 64
105
114
87
55 25
62
17
16
10
11
6
3
0
50
100
150
200
250
300
350
400
450
2013 2014 2015 2016 2017
PE/VC backed deal exit volume by type
IPO Trade sale Open market sale Share buyback Written off
17
No.
Source: AVCJ, CV Source and PwC analysis
PwC
24 38
60 82
132
-
45
37
60
122
5
17 19
17
14
6
13 1
6
11
2
-
0
50
100
150
200
250
300
2013 2014 2015 2016 2017
PE/VC backed exit IPO volume by bourse
Shenzhen Shanghai Hong Kong NYSE/ NASDAQ Others
China’s stock markets saw record numbers of IPOs overall and were the main route to liquidity for PEs – their higher valuations make them attractive compared to offshore markets, but HK also saw a healthy level of PE-backed offerings and there was a rebound of interest in the US
18
No.
Source: ChinaVenture and PwC analysis
PwC
Mainland China outbound
19
PwC
As expected, China outbound M&A declined from the super-peak of 2016, with government policy guidance resulting in a re-focusing of outbound investment towards strategic deals and away from passive and trophy assets; there were fewer mega-deals, with access to foreign currency an issue for many buyers, and overseas regulators also had some impact on deal activity. Nevertheless, the total value and volume of outbound transactions was higher than 2014 and 2015 combined (and the value decline is less dramatic if adjusted for the massive Chemchina-Syngenta transaction in 2016)
198272
380
920806
47.2 51.8 57.0
208.7
121.4
0
50
100
150
200
250
0
100
200
300
400
500
600
700
800
900
1,000
2013 2014 2015 2016 2017
Mainland China outbound deals, from 2013 to 2017
Announced Deal Volume Announce Deal Value
No. US$ billion
20
*US$43 bn ChemChina-Syngenta deal is included in 2016 outbound value
Source: ThomsonReuters, ChinaVenture and PwC analysis
**
PwC
Both POE and SOE investors were less active, but POEs continue to be the driving forceunder the “going out” strategy, with 60% of the total number of deals. It was thesecond straight year where the dollar value of POE deals exceeded their SOEcounterparts; financial investor participation in outbound activity is now wellestablished – accounting for nearly 30% of transactions
21
55 78 80 116 101
118145
205
609
467
25
49
95
195
238
-10
10
30
50
70
90
110
130
150
0
100
200
300
400
500
600
700
800
900
1000
2013 2014 2015 2016 2017
SOE Announced Deal Volume POE Announced Deal Volume Financial buyers Volume
SOE Announced Deal Value POE Announced Deal Value Financial buyer Deal Value
No.US$ billionChina mainland outbound deals, from 2013 to 2017
Source: ThomsonReuters, ChinaVenture and PwC analysis
PwC
Technology and industrials products (often also higher specification) are still the most active sectors, with consumer products also important: this aligns with the strategy of going out to bring back technologies, advanced industrial know-how (“industrial upgrade”), IP, brands and consumer products to the China market
22
5 26
14 12 4 13 -
27
81
95
6959
47 35
31
50
9037
40
23
1911
12
6
11 33
14 14 4 10 3
27
89
140
103
51 63 49 56
58
58
28
16
17 19
10
33
14
0
20
40
60
80
100
120
140
160
180
200
High Technology Industrials Consumer Financials Healthcare Materials Media andEntertainment
Others
2017 SOE 2017 POE 2017 Financial buyers 2016 SOE 2016 POE 2016 Financial buyers
China mainland outbound deals by industry sector – volume, 2017 vs. 2016
No.
Source: ThomsonReuters, ChinaVenture and PwC analysis
PwC
The participation of financial buyers in outbound M&A continued to grow – up by 22% by number on 2016; financial buyers have partnered with corporates, as well as investing on their own account, usually looking for businesses with a “China-angle” in their business plan
25 49
94
195
238
1.0
13.0 12.7
37.4
34.1
-
50
100
150
200
250
2013 2014 2015 2016 2017
0
5
10
15
20
25
30
35
40
Mainland China financial buyer-backed outbound deals
Announced deal volume Announced deal size
23
No. US$ billion
Source: ThomsonReuters, ChinaVenture and PwC analysis
PwC
43 85 95
217 221 63
81 110
300 254
33
64
107
219 208
29
17
29
69
49
6
11
17
46
25
8
7
9
13
16
11
5
7
22
22
5
2
6
34
11
0
100
200
300
400
500
600
700
800
900
1,000
2013 2014 2015 2016 2017
中国内地企业海外并购交易数量按投资目标地区分类
United States Europe Asia Oceania Other North America Africa South America Russia
No.
The search for advanced technologies and established brands mean that developed markets in the US and Europe – as well as some parts of Asia – remain the largest destinations for Chinese buyers; despite the much publicized impact of security reviews by CFIUS and the Trump government’s ambivalent attitude towards Chinese investment, the number of deals in the US actually increased slightly to a new record (but see next slide); Asia is also popular, with the Belt & Road Initiative having some impact
24
Source: ThomsonReuters, China Venture and PwC analysis
Outbound M&A deal volume by region of destination 2013-2017
PwC
5.0 13.8 23.4
94.5
40.7 11.0
15.4 14.3
16.6
36.2
11.7
11.4 11.8
65.8
18.3
7.0 3.7
2.2
14.9
3.8
0.1 1.7
0.1
7.4 4.9
9.7
7.3
2.4
11.2
0
50
100
150
200
250
2013 2014 2015 2016 2017
中国内地企业海外并购交易数量按投资目标地区分类
Europe Asia United States Oceania Other North America Africa South America Russia
US$ billion
However, geographical analysis of outbound deals by value shows that the dollar amount invested in the US has declined significantly, with Eur0pe also down (but note impact of ChemChina-Syngenta deal in comparatives), and Asia making up some of the shortfall
25
Outbound M&A deal value by region of destination 2013-2017
*US$43 bn ChemChina-Syngenta deal is included in 2016 outbound value
Source: ThomsonReuters, ChinaVenture and PwC analysis
*
PwC
Outbound M&A to Belt & Road countries surged (although not all deals are directly attributable to the initiative)
25 24
53
22
135
11.4
7.09.1
1.9
21.4
0
5
10
15
20
25
0
20
40
60
80
100
120
140
2013 2014 2015 2016 2017
China outbound to B&R, by value and volume from 2013 to 2017
Announced Deal Volume Announced Deal Value
No. US$ billion
26
Source: ThomsonReuters, ChinaVenture and PwC analysis
B&R (Belt and Road) includes 66 countries around 3 continents.
PwC
Key messages
27
PwC
Key messages — China M&A in 2017 (1 of 4)
• 2017 China M&A fell 11% to US$671bn off the record-highs of 2016, as China pursued a more strategic approach to outbound M&A
• Deal volumes declined by 11% overall, but the number of transactions was still the second highest ever annual total, and domestic strategic deals rose by 14% to a new record
• Deal values also declined for outbound, foreign inbound, and financial-buyer deals but domestic strategic deals increased by 14%, with some large transactions in the real estate sectors
• There were fewer mega-deals (> US$1bn) in 2017 compared to the previous two years, in particular reflecting the tightening and rationalization of outbound activities by government authorities
28
Overall Domestic and Foreign-Inbound Strategic
• Domestic strategic deal volumes reached a new high in 2017, continuing an unbroken year-on-year track record of increases – part of this increase can be attributed to some buyers refocussing on internal transactions due to some headwinds around outbound activity; deal values increased by 14% on 2016, largely due to strong activity in the real-estate sector
• Real estate M&A hit a record high, mainly because of unbalanced regional development, policy constraints and funding restrictions which encouraged market consolidation in the sector; industrials, technology, FS and consumer were also active
PwC
Key messages — China M&A in 2017 (2 of 4)
29
PE/VC and financial buyer deals
• Fund-raising by traditional PE remained strong – but these figures do not take into account huge volumes of available capital from alternative financial investors (so-called “Big Asset Management” or “BAM”) comprising: corporate and SOE investment arms/captive-PEs, financial institutions, and government-backed funds; the Asset Management Association of China reported US$1.5tn of assets under management by private equity funds in China at the end of 2017 – a nearly 7-fold increase over the last 3 years
• Financial buyer investment activity declined from the boom-year of 2016, but both domestic and foreign PEs were active, with deal volumes still 25% higher than in 2015
• Technology and real-estate related investment activity remain most important for financial buyers, accounting for 43% by value compared to 32% in 2016.
• Venture capital players, although still highly active, also declined off prior year peaks
• The much anticipated step-up in exit activity was seen for the first time in 2017, with a record number of both IPO and trade-sale exits
• China’s stock markets saw record numbers of IPOs overall and were the main route to liquidity for PEs – their higher valuations make them attractive compared to offshore markets, but HK also saw a healthy level of PE-backed offerings and there was a rebound of interest in the US
PwC
Key messages – China M&A in 2017 (3 of 4)
30
Mainland China Outbound
• As expected, China outbound M&A declined from the super-peak of 2016, with government policy guidance resulting in a re-focusing of outbound investment towards strategic deals and away from passive and trophy assets; there were fewer mega-deals, with access to foreign currency an issue for many buyers, and overseas regulators also had some impact on deal activity. Nevertheless, the total value and volume of outbound transactions was higher than 2014 and 2015 combined (and the value decline is less dramatic if adjusted for the massive ChemChina-Syngenta transaction in 2016)
• Both POE and SOE investors were less active, but POEs continue to be the driving force under the “going out” strategy, with 60% of the total number of deals. It was the second straight year where the dollar value of POE deals exceeded their SOE counterparts; financial investor participation in outbound activity is now well established, accounting for nearly 30% of transactions
• Technology and industrials products (often also higher specification) are still the most active sectors, with consumer products also important: this aligns with the strategy of going out to bring back technologies, advanced industrial know-how (“industrial upgrade”), IP, brands and consumer products to the China market
PwC
Key messages – China M&A in 2017 (4 of 4)
31
Mainland China Outbound (Continued)
• The participation of financial buyers in outbound M&A continued to grow – up by 22% by number on 2016; financial buyers have partnered with corporates as well as investing on their own account, usually looking for businesses with a “China-angle” in their business plan
• The search for advanced technologies and established brands mean that developed markets in the US and Europe – as well as some parts of Asia - remain the largest destinations for Chinese buyers; despite the much publicized impact of security reviews by CFIUS and the Trump government’s ambivalent attitude towards Chinese investment, the number of deals in the US actually increased slightly to a new record; Asia is also popular, with the Belt & Road Initiative having some impact
• However, geographical analysis of outbound deals by value shows that the dollar amount invested in the US has declined significantly, with Eur0pe also down (but note impact of ChemChina-Syngenta deal in comparatives), and Asia making up some of the shortfall
• Outbound M&A to Belt & Road countries surged (although not all deals are directly attributable to the initiative)
PwC
Outlook
32
PwC
Outlook for 2018 (1 of 6)
Overall
• We think overall China M&A for 2018 will show some growth over 2017 – tracking close to, and perhaps exceeding, the records of 2016
- With greater policy clarity, we believe outbound M&A will restart its growth trend
- Domestic activity will remain strong as the economy continues to mature and develop
- PE and financial buyer activity will grow (both domestically and outbound) under pressure to defray large amounts of capital.
33
PwC
Outlook for 2018 (2 of 6)
China Outbound
• China issued new rules on 26th December 2017, to streamline administrative procedures and strengthen regulation over outbound investment – although not a major policy change compared to recent practice, we think this brings welcome clarity and will result in a more orderly cross-border M&A scene in 2018
• Foreign exchange availability has been relaxed somewhat, but will continue to have a role as a mechanism by which the new policies are enforced, necessitating early communication and planning by Chinese buyers
• With the new guidance and the China National Congress now behind us, we think that Chinese investors can embark on overseas deals with more certainty than in 2017 and it is possible that we will see a strong first half of 2018 in particular, with some backlog released and buyers having one eye on available currency quotas
• On-strategy outbound M&A (including going-out-to-bring-back, industrial upgrade, and Belt & Road) continue to be encouraged by government policy, and the stabilisation of the Renminbi, availability of capital (including from PE and BAM) and positive valuation arbitrage for A-share listed buyers, all point to continuing strong activity
• Synergistic deals around industrial value chains, industrial upgrade and advanced manufacturing, consumption upgrade, metals-mining-resources, aerospace and energy industries will be important contributors to activity; and we expect China’s large technology companies to be active on the global stage
• However, investment in non-strategic or passive assets in sectors such as sports, entertainment and real-estate are likely to decline
• Overall, we expect a modest increase over 2017, with stronger growth continuing in the next few years.
34
PwC
Outlook for 2018 (3 of 6)
Domestic and Foreign-Inbound Strategic
Domestic strategic
• Domestic strategic activity will continue at existing robust levels of activity driven by:
- General maturing, consolidation and restructuring in the economy
- A-share listed companies and POEs taking advantage of multiples arbitrage and searching for inorganic growth in a slower organic growth environment
- Active industry sectors including technology, real-estate, financial services and healthcare
- Ongoing SOE reform
Foreign-Inbound strategic
• Inbound strategic deals are expected to remain at reasonable activity levels both from continued restructuring of existing businesses in China as well as inward investment in various sectors, including automotive and pharma.
35
PwC
Outlook for 2018 (4 of 6)
Private equity (and other financial investors)
• Unprecedented amounts of capital are now in play from “Big Asset Management”, including insurers (and other financial institutions); government and industry funds; SOE funds; and private-company funds
• With pressure to defray this wall of money, we expect financial buyer activity to continue to increase in the mid to long term, with outbound M&A a particular driver of growth – as in 2017
• We expect exit activities to keep their momentum with good activity in both A-share and offshore (HK and NY) IPOs, and further growth in trade sales
• Overall, we think full year 2018 investment will be higher than in 2017, perhaps re-approaching the peak of 2016.
36
PwC
Outlook for 2018 (5 of 6)
Key industry sectors
• Real estate
- M&A strategy in real estates sector is not only market driven, but also the result of tighter regulatory policy: unbalanced regional development, policy constraints and funding restrictions caused domestic M&A activities and market consolidation in the real estate sector, and are likely to increase further
- However, traditional real estate outbound M&A activity is expected to decrease in the near future for reasons described earlier
- With improving macro-economic trends, more stable growth in the real estate market is anticipated, and corporations that have sufficient land and capital reserves may grow rapidly in a highly competitive domestic market.
37
PwC
Outlook for 2018 (6 of 6)
Key industry sectors (cont’d)
• Technology
- E-commerce and online platforms will continue to be of interest to some of the tech majors
- Cross-over has a profound impact on various industries, such as retail, education, real estate (lease) etc., as the TMT companies evolve from a service platform to gradually acquire assets and operate the underlying business. The cross-over between financial services and technology is also an area of interest and we expect activity around payment platforms, crypto-currencies and blockchain
- New technology such as AI, IoT and blockchain continue to be a focus of investors
- The favorable policy change by the HK Stock Exchange offers more flexible exit alternatives, which will further boost M&A activities
- Increasing scrutiny of overseas security review / approval and outbound investment guidance have cooled down activity levels in the US and Europe, and focus is being shifted somewhat to the Asia market.
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PwC
Data compilation methodology and disclaimer
Statistics contained in this presentation and the press release may vary from those contained in previous press releases. There are three reasons for this: ThomsonReuters and ChinaVenture historical data is constantly updated as deals are confirmed or disclosed; PricewaterhouseCoopers has excluded certain transactions which are more in the nature of internal reorganisations than transfers of control; and exchange rate data has been adjusted.
• Acquisitions of private/public companies resulting in change of control
• Investments in private/public companies (involving at least 5% ownership)
• Mergers
• Buyouts/buyins (LBOs, MBOs, MBIs)
• Privatisations
• Tender offers
• Spinoffs
• Splitoff of a wholly-owned subsidiary when 100% sold via IPO
• Divestment of company, division or trading assets resulting in change of control at parent level
• Reverse takeovers
• Re-capitalisation
• Joint Venture buyouts
• Joint Ventures
• Receivership or bankruptcy sales/auctions
• Tracking stock
Included Deals Excluded Deals
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• Property/real estate for individual properties
• Rumoured transactions
• Options granted to acquire an additional stake when not 100% of the shares has been acquired
• Any purchase of brand rights
• Land acquisitions
• Equity placements in funds
• Stake purchases by mutual funds
• Open market share buyback/retirement of stock unless part of a privatisation
• Balance sheet restructuring or internal restructuring
• Investments in greenfield operations
• Going private transactions
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