China M&A 2021 review and 2022 outlook

February 2022

China M&A volumes surged to a new record of 12,790 transactions in 2021 – up 21% from the previous year – while deal values fell 19% to $637bn from the previous year’s record level. For the first time, PE is the largest category of M&A by value, according to PwC’s China M&A 2021 Review and 2022 Outlook.

China M&A surged in volume terms thanks to the dual-circulation policy and ongoing industrial upgrade programmes. The digital economy, green development and domestic consumption will continue to drive M&A transactions in the future. The various economic dislocations associated with Covid-19 and geo-political trends will also give rise to domestic transaction activity. Corporate reorganizations and changes in strategy will be a further driver of deals.

China M&A 2021 review and 2022 outlook

There were 97 mega-deals (>$1bn) in 2021, many of which were aligned with key domestic economic policies such as industrial upgrade (23 deals, $56bn), dual-circulation (17 deals, $31bn), and ESG (9 deals, $26bn). There has been a continuation of the trend, first seen in 2020, for more PE mega-deals.

China M&A is likely to continue at elevated levels in 2022 – driven by the ongoing transformation of the Chinese economy and record levels of dry-powder for financial sponsors. PwC expects domestic M&A in 2022 to be broadly comparable or just slightly lower than in 2021. There will continue to be considerable demand for equity capital, and the PE industry has plenty of dry powder. Overall, PwC expects PE investment activity in 2022 to remain on a par with or marginally below the record levels of 2021.