China M&A 2023 ​review and outlook

China M&A was down 28% to US$333bn by value and down 27% to 8,563 by volume in 2023. Although deal levels hit multi-year lows in full year 2023, the second half of the year did show some improvement over the first half, up 19% in value terms and 12% by volume. In addition, outbound investments by privately-owned enterprises bucked the trend rebounding by 13% in volume and 62% in value compared to the 2022 lows.

For the domestic M&A market, although facing daunting challenges such as the complex international political environment, slow domestic economic recovery, and industrial restructuring, the overall improvement of the global economy and M&A situation will definitely provide a relatively favorable external environment for the China M&A in 2024. In this scenario, investors were looking for more consistently positive economic indicators, substantive government support or stimulus to release the economy’s inherent potential, and sustained improvement in public equity valuations. If these factors emerged, we would hope to see a more robust and sustained deal activity for the domestic M&A market.

We expect growth areas are likely to include: PE exit activity, MNC portfolio optimisation, ongoing SOE reform, A-share capital market M&A, and domestic (renminbi funded) M&A. Making predictions is difficult in this environment, but on balance we do expect a double digit increase in M&A numbers in 2024 compared to 2023.