China’s 2025 M&A transactions may rise 15% as volume recovers from rock bottom, UBS says

UBS says China M&A deal volume fell 10 per cent in November from a year earlier to US$297 billion

Transaction volume in China’s mergers and acquisitions (M&A) market will bottom out this year and rise by 15 per cent in 2025, investment bank UBS says, thanks to falling interest rates, privatisations, private-equity activities and foreign firms selling their Chinese businesses.

UBS, citing data from Dealogic, said China M&A deal volume in the first 11 months of 2024 fell 10 per cent from a year earlier to US$297 billion, putting it on track to sink for the third year in a row. The tally, covering mainland China, Hong Kong and Taiwan, was the lowest in at least a decade, it said.

A rebound is on the cards for next year, according to Samson Lambert Lo, M&A co-head for Asia-Pacific at UBS, as lower interest rates prompt private equity funds to increase their deal making activities and participate in the privatisations of listed companies in Hong Kong.

“It will definitely be higher next year, with transaction volume increasing by 15 per cent or more,” he said.

Taking companies private has become the “talk of the town” in Asia, as share prices remain challenged in markets like Hong Kong, the bank said in a presentation on Tuesday.

For example, China Mobile on Monday said it offered to buy Hong Kong-listed broadband service provider HKBN for as much as HK$7.8 billion (US$1 billion), joining a bidding war with US private equity firm I Squared Capital, which earlier made a non-binding offer to buy HKBN for an undisclosed amount.

Lo said private equity funds are under pressure to do more deals – at smaller sizes – as the Covid-19 pandemic becomes more distant in the rear-view mirror.

Also, Lo said, multinational companies and overseas investors will continue to evaluate their China strategies, which could lead to divestments or increased investments. Foreign investment into China from Europe, the Middle East and Africa will continue to rise, especially in the financial, consumer and healthcare sectors.

Chinese outbound M&A could occur in the European, Japanese, South Korean and Southeast Asian markets, as companies seek opportunities in the automotive, industrial, artificial intelligence, medical and healthcare sectors, he said. But deal sizes will mostly be capped at 1 billion US dollars or euros to avoid regulatory hurdles, Lo said.

Lo said it is not yet clear how the second Trump presidency will affect US-China M&A activity.

“We need more clarity because it’s a new administration [with] new policies,” he said. “As a result of that, in the near term, I just don’t see anyone picking up the pace of US M&A. It has been a challenging environment over the last many years.”

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