In recent years, the M&A market landscape in China has witnessed fundamental changes. Between 2009 and 2016, the market size increased tremendously from less than 300 to more than 3,000 deals completed with a market value of more than 1.8 trillion yuan. This trend effected both domestic and cross-border M&A. Beginning in 2017 however, total deal volume gradually declined to around 1,800 deals in 2019. This was due to global uncertainties and increased policy measures to control the market. However, overall market size is still much larger than a decade ago.
Most M&A transactions of Chinese companies take place in the domestic market. The economically better developed regions, including China’s largest cities Beijing and Shanghai, are still leading the market. In 2019, more than 180 M&A transactions were completed in Beijing with transaction value of around 185 billion yuan. Foreign inbound M&A activities have seen an increase in deal values in recent years and are backed by further market opening measures initiated in 2018.
The outbound M&A market has been strongly influenced by market uncertainties and political restrictions in recent years. Especially the number of large-sized deals has declined, effecting U.S. and European markets in particular. However, Chinese companies still try to acquire technology, know how, intellectual property, and brands from abroad through smaller sized transactions resulting in a rebound of announced deal volume in 2019. Outbound activity to Belt and Road countries developed especially well in that overall context.
In the context of Chinese internet giants competing for market share, some M&A transactions of internet companies were particularly worth mentioning. In 2018, Alibaba has taken full control of the startup Ele.me which specializes on local food delivery service. This deal indicates Alibaba’s great ambition in the local services sector. Energy, retail and high tech remain sectors where M&A transactions with large deal value took place.