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PwC M&A 2012 Review and
2013 Outlook
30 January 2013
PwC China and Hong Kong Transaction Services Leader: David Brown
PwC ...
PwC
Foreword – explanation of data shown in this presentation (1 of 2)
• The data presented is based on information compil...
PwC
Foreword – explanation of data shown in this presentation (2 of 2)
• “VC deals” refer to financial buyer deals with de...
PwC
Overview
PwC
Key messages (1 of 2)
Overall
• Overall 2012 China M&A decreased 26% by volume and 9% by value, with only
Outbound dea...
PwC
Key messages (2 of 2)
Domestic and Foreign-Inbound Strategic
• Both Domestic and Foreign-Inbound Strategic buyer deal ...
PwC
Volume Value Volume Value Volume Value Volume Value Volume Value
Strategic buyers (US$bn) (US$bn) (US$bn) (US$bn) (US$...
PwC
3,006
2,774 2,947
3,262
2,667
614
409
539
482
286
365
254
425
502
332
126
144
188
206
191
0
500
1,000
1,500
2,000
2,50...
PwC
... But China Outbound deal values grew by 54% and now comprise
more than a third of overall M&A activity measured by ...
PwC
Strategic buyers
10
PwC
Both Domestic and Foreign-Inbound Strategic buyer deal activity fell to their lowest
levels in the last five years wit...
PwC
Nearly all industry sectors posted declines, both in terms of
volumes ...
12
Source: ThomsonReuters, ChinaVenture and ...
PwC
... And values
33.1
12.7
30.3
22.0 16.6
9.0
11.9
5.2
12.2 16.1
23.2
10.4
22.3
16.1 13.7
21.3
20.3
22.0
22.2
12.5
15.2
...
PwC
Japan remains the most active Foreign-Inbound M&A investor for the
second year running, but we saw several deals put o...
PwC
... However, the biggest deals are still coming from US and European
buyers; we expect Foreign-Inbound deal activity t...
PwC
PE/VC deals
16
PwC
PE and VC fundraising for China investment in 2012 trailed 2011’s record levels by less than we
expected; however, if ...
PwC
2012 was a poor year for PE deal numbers, though deal sizes are trending upwards; we think that
deal volumes will reco...
PwC
PEs tend to target industries that are “on strategy” for China,
including consumer-linked, healthcare, media and enter...
PwC
Growth capital deals predominate, but PIPE (private investment in public
equity) deals are important and we are seeing...
PwC
If we look at the same statistics in terms of deal volumes (rather than values) the
dominance of growth capital is ver...
PwC
The PE industry in China is notable in that most exits have been by IPO;
predictably, there has been a significant dec...
PwC
PE backed IPOs in offshore markets such as HK and New York in 2012 were the lowest
in the last three years; we think t...
PwC
Overall, there is a huge overhang of Chinese PE and VC-backed enterprises waiting to
come to market either by IPO or b...
PwC
China mainland outbound
25
PwC
Although deal volumes surprisingly showed a small decline, China
Outbound deal values grew by 54% to reach a new recor...
PwC
We are seeing privately owned enterprises (POEs) taking on larger
deal sizes; we think that private sector companies w...
PwC
Although the state sponsored push to secure energy and resources
is evident from deal value statistics ...
28
China ma...
PwC
... The growing activity of private sector buyers in acquiring industrial technologies
and consumer-linked businesses ...
PwC
Europe now challenges North America as the most important overseas destination for
Chinese buyers; the importance of m...
PwC
PE is emerging as a player in Outbound deal activity; the TPGs and Bain Capitals of
China will emerge to compete with ...
PwC
Key messages
32
PwC
Key messages (1 of 2)
Overall
• Overall 2012 China M&A decreased 26% by volume and 9% by value, with only
Outbound dea...
PwC
Key messages (2 of 2)
Domestic and Foreign-Inbound Strategic
• Both Domestic and Foreign-Inbound Strategic buyer deal ...
PwC
Data compilation methodology:
Key messages - disclaimer
Statistics contained in this presentation and the press releas...
© 2013 PricewaterhouseCoopers Limited. All rights reserved. “PwC” refers to PricewaterhouseCoopers
Limited or, as the cont...
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PwC M&A 2012 Review and 2013 Outlook - January 2013

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PwC M&A 2012 Review and 2013 Outlook 30 January 2013
PwC China and Hong Kong Transaction Services Leader: David Brown
PwC China Tax and Business Advisory Services Partner : Jeremy Ngai

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  1. 1. PwC M&A 2012 Review and 2013 Outlook 30 January 2013 PwC China and Hong Kong Transaction Services Leader: David Brown PwC China Tax and Business Advisory Services Partner : Jeremy Ngai
  2. 2. PwC Foreword – explanation of data shown in this presentation (1 of 2) • The data presented is based on information compiled by ThomsonReuters, ChinaVenture 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 refers 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 but invested by PEs 2
  3. 3. 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$10mn and/or with undisclosed deal value but invested by VCs • “Strategic buyer” refers to corporate buyers (as opposed to financial buyers) that acquire companies with the objective of integrating the acquisition in their existing business • “Financial buyer” refers to investors that acquire companies with the objective of realizing a return on their investment by selling the business at a profit at a future date and mainly, but not entirely, comprise PE and VC funds • In order to exclude foreign exchange impact, deal values from 2008 to 2011 were adjusted based on 2012 average Rmb/US$ exchange rate 3
  4. 4. PwC Overview
  5. 5. PwC Key messages (1 of 2) Overall • Overall 2012 China M&A decreased 26% by volume and 9% by value, with only Outbound deals showing growth (in value terms); we expect M&A activity to rebound in all sectors in 2013, with Outbound activity continuing to grow especially strongly China Outbound • Although China Outbound deal volumes surprisingly showed a small decline, deal values grew by 54% to reach a new record high of US$65.2 billion comprising more than a third of overall M&A activity measured by value, by far the highest proportion ever; we see many more deals in the pipeline and expect this growth trend to continue strongly with another record year in 2013 • We are seeing privately owned enterprises (POEs) taking on larger deal sizes; we think that private sector companies will be key drivers in the future growth of China Outbound M&A • The growing activity of private sector buyers in acquiring industrial technologies and consumer-linked businesses overseas is an important trend; many of these deals are aimed at bringing advanced western technologies, know-how, IP and brands back for use in the Chinese domestic market; we are also seeing some POEs using overseas M&A to go global in addition to concentrating on the domestic market 5
  6. 6. PwC Key messages (2 of 2) Domestic and Foreign-Inbound Strategic • Both Domestic and Foreign-Inbound Strategic buyer deal activity fell to their lowest levels in the last five years with declines greater than those seen after the global financial crisis • We think activity will rebound in 2013 as the direction of the Chinese economy becomes clearer, industry consolidation accelerates, domestic leadership changes take effect, and foreign economies start to emerge from their stressed states allowing MNCs to deploy cash reserves with greater confidence implementing their China market entry or growth strategies Private Equity • In the PE sector there will be sharp consolidation across the industry, and the backlog of exits represents a real challenge for the sector • PE has emerged as a key provider of capital to the liquidity starved private sector of the economy in China with real policy support - this demand for capital is driving strong market growth and activity; there are exceptionally strong tailwinds for the PE industry in China over the medium term • We think new deal and exit activity will accelerate strongly from 2Q13 as pricing expectations adjust, 2012 results become available, IPO markets re-open, and China’s leadership transition takes effect; PE deal activity (new investments and exits by both IPO and M&A) will reach new record highs if not in 2013 then in 2014 6
  7. 7. PwC Volume Value Volume Value Volume Value Volume Value Volume Value Strategic buyers (US$bn) (US$bn) (US$bn) (US$bn) (US$bn) Domestic 3,006 150.5 2,774 100.3 2,947 140.1 3,262 117.6 2,667 88.0 -18% -25% Foreign 614 19.3 409 11.3 539 18.0 482 17.3 286 9.1 -41% -47% Total Strategic buyers 3,620 169.8 3,183 111.6 3,486 158.1 3,744 134.9 2,953 97.1 -21% -28% Financial buyers Private Equity 365 22.0 254 22.3 425 24.9 502 32.0 332 23.5 -34% -27% VC 694 1.7 712 1.8 1,011 2.5 903 1.8 473 0.9 -48% -48% Total Financial buyers 1,059 23.8 966 24.1 1,436 27.4 1,405 33.8 805 24.4 -43% -28% China mainland Outbound SOE 27 6.8 45 26.3 64 34.5 48 33.0 48 39.7 0% 20% POE 99 3.6 99 6.5 124 6.4 158 9.4 143 25.5 -9% 171% Total China mainland Outbound 126 10.3 144 32.8 188 41.0 206 42.4 191 65.2 -7% 54% HK Outbound 156 6.6 152 6.2 171 18.8 183 8.2 166 12.8 -9% 55% Total 4,961 210.6 4,445 174.7 5,281 245.3 5,538 219.3 4,115 199.5 -26% -9% % Diff volum e 2012 vs. 2011 % Diff value 2012 vs. 2011 2008 2009 2010 2011 2012 7 Source: ThomsonReuters, ChinaVenture and PwC analysis Total deal volume and value, from 2008 to 2012 Overall 2012 China M&A decreased 26% by volume and 9% by value, with only Outbound deals showing growth (in value terms); we expect M&A activity to rebound in all sectors in 2013, with Outbound activity continuing to grow especially strongly
  8. 8. PwC 3,006 2,774 2,947 3,262 2,667 614 409 539 482 286 365 254 425 502 332 126 144 188 206 191 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 2008 2009 2010 2011 2012 Deal volume by main category Domestic Strategic Buyers Foreign Strategic Buyers Private Equity Deals China Mainland Outbound Deal volumes decreased across all major categories ... 8 Source: ThomsonReuters, ChinaVenture and PwC analysis No.
  9. 9. PwC ... But China Outbound deal values grew by 54% and now comprise more than a third of overall M&A activity measured by value, by far the highest proportion ever 150.5 100.3 140.1 117.6 88.0 19.3 11.3 18.0 17.3 9.1 22.0 22.3 24.9 32.0 23.5 10.3 32.8 41.0 42.4 65.2 0 50 100 150 200 250 2008 2009 2010 2011 2012 Deal value by main category Domestic Strategic Buyers Foreign Strategic Buyers Private Equity Deals China Mainland Outbound US$ billion 9 Source: ThomsonReuters, ChinaVenture and PwC analysis
  10. 10. PwC Strategic buyers 10
  11. 11. PwC Both Domestic and Foreign-Inbound Strategic buyer deal activity fell to their lowest levels in the last five years with declines greater than those seen after the global financial crisis; we think activity will rebound in 2013 as the direction of the Chinese economy becomes clearer, industry consolidation accelerates, domestic leadership changes take effect, and foreign economies start to emerge from their stressed states 614 409 539 482 286 3,006 2,774 2,947 3,262 2,667 19.3 11.3 18.0 17.3 9.1 150.5 100.3 140.1 117.6 88.0 0 20 40 60 80 100 120 140 160 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 2008 2009 2010 2011 2012 Strategic buyer deals, from 2008 to 2012 Announced Deal Volume Inbound Announced Deal Volume Domestic Announced Deal Value Inbound Announced Deal Value Domestic No. US$ billion 11 Source: ThomsonReuters, ChinaVenture and PwC analysis
  12. 12. PwC Nearly all industry sectors posted declines, both in terms of volumes ... 12 Source: ThomsonReuters, ChinaVenture and PwC analysis 664 539 614 668 570 529 428 475 575 439 522 381 446 500 402 372 310 320 395 352 432 404 369 384 273 358 106 137 252 264 241 253 248 272 203 502 762 877 698 450 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 2008 2009 2010 2011 2012 Strategic buyer deal volume by industry sector Raw Materials Industrials Consumer Related High Technology Real Estate Financial Services Energy and Power Others No.
  13. 13. PwC ... And values 33.1 12.7 30.3 22.0 16.6 9.0 11.9 5.2 12.2 16.1 23.2 10.4 22.3 16.1 13.7 21.3 20.3 22.0 22.2 12.5 15.2 14.0 19.4 18.1 10.5 9.9 8.7 11.3 11.0 8.6 9.2 10.5 11.3 9.5 6.3 48.9 23.0 36.2 23.8 12.6 0 20 40 60 80 100 120 140 160 180 2008 2009 2010 2011 2012 Strategic buyer deal value by industry sector Raw Materials High Technology Financial Services Real Estate Industrials Consumer Related Energy and Power Others US$ billion 13 Source: ThomsonReuters, ChinaVenture and PwC analysis
  14. 14. PwC Japan remains the most active Foreign-Inbound M&A investor for the second year running, but we saw several deals put on hold in the second half year of the year in response to the Diaoyu Islands crisis; US and European deal numbers have steadily declined since their 2010 high ... 29 23 67 94 66 124 73 98 89 52 127 67 92 79 46 87 35 54 48 34 70 67 70 31 28 0 50 100 150 200 250 300 350 400 450 500 550 600 650 2008 2009 2010 2011 2012 Foreign strategic buyer deal volume by region of origin Japan SE Asia US EU Other Asia Oceania UK Canada Africa Other Europe 14 Source: ThomsonReuters, ChinaVenture and PwC analysis No.
  15. 15. PwC ... However, the biggest deals are still coming from US and European buyers; we expect Foreign-Inbound deal activity to rebound 2013 as European and US economies start to recover allowing MNCs to deploy cash reserves with greater confidence, implementing their China market entry or growth strategies 3.4 1.7 2.1 1.8 3.4 0.3 0.2 0.8 0.4 1.3 3.5 0.8 5.2 4.5 1.3 2.9 2.3 1.9 1.2 1.2 4.2 1.0 1.5 2.9 1.0 0.6 1.5 1.3 2.1 0.7 0 5 10 15 20 25 2008 2009 2010 2011 2012 Foreign strategic buyer deal value by region of origin US UK EU Other Asia SE Asia Japan Canada Oceania Africa Other Europe 15 Source: ThomsonReuters, ChinaVenture and PwC analysis US$ billion
  16. 16. PwC PE/VC deals 16
  17. 17. PwC PE and VC fundraising for China investment in 2012 trailed 2011’s record levels by less than we expected; however, if we look closer we see much fewer individual fund raisings but there were some large funds raised by many of the leading and established PEs including KKR ($6bn), PAG ($2.5bn), Hony ($2.4bn), Bain ($2.3bn) and Fountainvest ($1.4bn); there will be winners and losers in the sector - high quality, professional PEs will thrive, but the bubble is already bursting for many of the plethora of renminbi funds raised over the last few years 17 Source: AVCJ and PwC analysis 4.4 6.6 21.0 31.8 20.3 39.1 9.3 14.9 21.8 21.1 169 163 250 280 117 0 50 100 150 200 250 300 0 10 20 30 40 50 60 2008 2009 2010 2011 2012 PE/VC fund raising for China investment Renminbi Fund Size Non-renminbi Fund Size Fund Volume No.US$ billion * Excludes global funds investing in China
  18. 18. PwC 2012 was a poor year for PE deal numbers, though deal sizes are trending upwards; we think that deal volumes will recover starting from 2Q of 2013 and average deal sizes will continue to trend upwards; however, within China, the days where PEs could throw money at deals and expect a “rising tide to float all boats” have gone; careful and professional diligence is vitally important; fraud risk is high; PEs should be prepared to walk away from opportunities if sellers will not accommodate diligence 365 254 425 502 332 22.0 22.3 24.9 32.0 23.5 0 5 10 15 20 25 30 35 0 50 100 150 200 250 300 350 400 450 500 550 2008 2009 2010 2011 2012 Private Equity deals, from 2008 to 2012 Announced Deal Volume Announced Deal Value No. US$ billion 18 Source: ThomsonReuters, ChinaVenture and PwC analysis
  19. 19. PwC PEs tend to target industries that are “on strategy” for China, including consumer-linked, healthcare, media and entertainment, technology, and service industries 77 54 98 124 73 33 20 47 30 46 60 32 31 72 45 45 50 88 90 42 40 23 34 54 32 0 50 100 150 200 250 300 350 400 450 500 550 2008 2009 2010 2011 2012 PE deal volume by industry sector Consumer related Healthcare Media and Entertainment Industrials High Technology Real Estate Financial Services Energy and Power Raw Materials No. 19 Source: ThomsonReuters, ChinaVenture and PwC analysis
  20. 20. PwC Growth capital deals predominate, but PIPE (private investment in public equity) deals are important and we are seeing a buy-out market starting to emerge; we expect the nascent trend towards buy-outs to strengthen over the medium term 16.7 6.1 15.0 18.6 14.2 4.2 15.6 9.3 10.6 5.1 1.2 0.6 0.6 2.7 4.1 0 5 10 15 20 25 30 35 2008 2009 2010 2011 2012 PE deal value by type Growth PIPE Buyout US$ billion 20 Source: ThomsonReuters, ChinaVenture and PwC analysis
  21. 21. PwC If we look at the same statistics in terms of deal volumes (rather than values) the dominance of growth capital is very evident; PE has emerged as a key provider of capital to the liquidity starved private sector of the economy in China with real policy support - this demand for capital is driving strong market growth and activity 329 199 327 368 246 21 51 85 118 68 15 4 13 16 18 0 50 100 150 200 250 300 350 400 450 500 550 2008 2009 2010 2011 2012 PE deal volume by type Growth PIPE Buyout 21 Source: ThomsonReuters, ChinaVenture and PwC analysis No.
  22. 22. PwC The PE industry in China is notable in that most exits have been by IPO; predictably, there has been a significant decline in 2012; there is a growing pipeline of future exits, perhaps more than the market can handle – this will be a challenge for the PE industry over the next few years 46 88 212 171 98 44 84 83 91 62 7 5 8 6 8 0 50 100 150 200 250 300 350 2008 2009 2010 2011 2012 PE/VC backed deal exit volume by type IPO M&A - trade M&A - PE 22 No. Source: AVCJ and PwC analysis
  23. 23. PwC PE backed IPOs in offshore markets such as HK and New York in 2012 were the lowest in the last three years; we think that PE backed IPO activity must increase markedly in the short to medium term when capital markets return to normal functioning; the domestic A-share markets has been and will continue to be an important exit route for PE despite its many challenges 21 48 118 106 70 12 27 39 26 11 2 11 18 11 4 7 30 11 2 7 6 14 10 4 0 50 100 150 200 250 2008 2009 2010 2011 2012 PE/VC backed IPO exit volume by bourse Shenzhen Hong Kong Shanghai A NYSE/ NASDAQ Others 23 No. Source: AVCJ and PwC analysis
  24. 24. PwC Overall, there is a huge overhang of Chinese PE and VC-backed enterprises waiting to come to market either by IPO or by M&A exit; the industry as a whole is moving into “exit phase” and the backlog of exits represents a real challenge; it is more than IPO markets can absorb, and trade and secondary sales by M&A will become more frequent; the quantum step-up in exit activity will be a key driver of future activity from this sector 24 365 254 425 502 332 694 712 1,011 903 473 46 88 212 171 9851 89 91 97 70 0 100 200 300 400 500 600 700 800 900 1,000 1,100 1,200 1,300 1,400 1,500 2008 2009 2010 2011 2012 PE/VC deal volume vs. No. of exits PE deals VC deals IPO exit M&A exit Source: ThomsonReuters, ChinaVenture, AVCJ and PwC analysis No.
  25. 25. PwC China mainland outbound 25
  26. 26. PwC Although deal volumes surprisingly showed a small decline, China Outbound deal values grew by 54% to reach a new record high of US$65.2 billion; we see many more deals in the pipeline and expect this growth trend to continue strongly with another record year in 2013 126 144 188 206 191 10.3 32.8 41.0 42.4 65.2 0 10 20 30 40 50 60 70 0 50 100 150 200 250 2008 2009 2010 2011 2012 China mainland outbound deals, from 2008 to 2012 Announced Deal Volume Announce Deal Value No. US$ billion 26 Source: ThomsonReuters, ChinaVenture and PwC analysis
  27. 27. PwC We are seeing privately owned enterprises (POEs) taking on larger deal sizes; we think that private sector companies will be key drivers in the future growth of China Outbound M&A 27 Source: ThomsonReuters, ChinaVenture and PwC analysis 99 99 124 158 143 27 45 64 48 48 3.6 6.5 6.4 9.4 25.5 6.8 26.3 34.5 33.0 39.7 0 5 10 15 20 25 30 35 40 45 0 50 100 150 200 250 2008 2009 2010 2011 2012 Strategic buyer deals, from 2008 to 2012 POE Announced Deal Volume SOE Announced Deal Volume POE Announced Deal Value SOE Announced Deal Value No. US$ billion
  28. 28. PwC Although the state sponsored push to secure energy and resources is evident from deal value statistics ... 28 China mainland outbound deals by industry sector – By value of deals (US$ billion), 2012 vs. 2011 Source: ThomsonReuters, ChinaVenture and PwC analysis 36.2 1.1 1.6 0.7 10.7 4.6 5.4 1.2 2.6 0.2 23.1 1.1 8.5 1.9 1.3 4.1 1.4 0 5 10 15 20 25 30 35 40 Energy and Power Consumer related Industrials Financial Services Raw materials Media and Entertainment Others 2012 SOE 2012 POE 2011 SOE 2011 POE US$ billion
  29. 29. PwC ... The growing activity of private sector buyers in acquiring industrial technologies and consumer-linked businesses overseas is an important trend; many of these deals are aimed at bringing advanced western technologies, know-how, IP and brands back for use in the Chinese domestic market; we are also seeing some POEs using overseas M&A to go global in addition to concentrating on the domestic market 29 13 6 22 2 2 33 33 10 28 17 10 5 3 4 19 5 16 7 37 34 13 19 32 4 3 2 14 0 10 20 30 40 50 60 2012 SOE 2012 POE 2011 SOE 2011 POE China mainland outbound deals by industry sector –By number of deals, 2012 vs. 2011 Source: ThomsonReuters, ChinaVenture and PwC analysis No.
  30. 30. PwC Europe now challenges North America as the most important overseas destination for Chinese buyers; the importance of mature western markets reflects the search for advanced technologies and know-how ; Asian deals have declined sharply, primarily due to a fall in Japan transactions from 16 in 2011 to just 3 in 2012 Outbound M&A deal volume by region of destination 2012 vs. 2011 Source: ThomsonReuters and PwC analysis 56 North America 57 44 South America Europe Africa Asia Oceania 10 34 4 25 9 5757 8 27 2012 2011 30 18 Russia
  31. 31. PwC PE is emerging as a player in Outbound deal activity; the TPGs and Bain Capitals of China will emerge to compete with their global peers; we are already seeing a step-up in Outbound M&A involving some of the pre-eminent Chinese PEs and the Outbound trend is happening much faster than many people predicted or even realise 11 4 8 8 4 7 8 20 18 0 5 10 15 20 25 30 2008 2009 2010 2011 2012 China mainland PE backed outbound deal volume by PE category SWFs Other PEs 31 Source: ThomsonReuters, ChinaVenture and PwC analysis No.
  32. 32. PwC Key messages 32
  33. 33. PwC Key messages (1 of 2) Overall • Overall 2012 China M&A decreased 26% by volume and 9% by value, with only Outbound deals showing growth (in value terms); we expect M&A activity to rebound in all sectors in 2013, with Outbound activity continuing to grow especially strongly China Outbound • Although China Outbound deal volumes surprisingly showed a small decline, deal values grew by 54% to reach a new record high of US$65.2 billion comprising more than a third of overall M&A activity measured by value, by far the highest proportion ever; we see many more deals in the pipeline and expect this growth trend to continue strongly with another record year in 2013 • We are seeing privately owned enterprises (POEs) taking on larger deal sizes; we think that private sector companies will be key drivers in the future growth of China Outbound M&A • The growing activity of private sector buyers in acquiring industrial technologies and consumer-linked businesses overseas is an important trend; many of these deals are aimed at bringing advanced western technologies, know-how, IP and brands back for use in the Chinese domestic market; we are also seeing some POEs using overseas M&A to go global in addition to concentrating on the domestic market 33
  34. 34. PwC Key messages (2 of 2) Domestic and Foreign-Inbound Strategic • Both Domestic and Foreign-Inbound Strategic buyer deal activity fell to their lowest levels in the last five years with declines greater than those seen after the global financial crisis • We think activity will rebound in 2013 as the direction of the Chinese economy becomes clearer, industry consolidation accelerates, domestic leadership changes take effect, and foreign economies start to emerge from their stressed states allowing MNCs to deploy cash reserves with greater confidence implementing their China market entry or growth strategies Private Equity • In the PE sector there will be sharp consolidation across the industry, and the backlog of exits represents a real challenge for the sector • PE has emerged as a key provider of capital to the liquidity starved private sector of the economy in China with real policy support - this demand for capital is driving strong market growth and activity; there are exceptionally strong tailwinds for the PE industry in China over the medium term • We think new deal and exit activity will accelerate strongly from 2Q13 as pricing expectations adjust, 2012 results become available, IPO markets re-open, and China’s leadership transition takes effect; PE deal activity (new investments and exits by both IPO and M&A) will reach new record highs if not in 2013 then in 2014 34
  35. 35. PwC Data compilation methodology: Key messages - 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 • 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 Included Deals Excluded Deals 35
  36. 36. © 2013 PricewaterhouseCoopers Limited. All rights reserved. “PwC” refers to PricewaterhouseCoopers Limited or, as the context requires, the PwC global network or other member firms of the network, each of which is a separate legal entity.
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