Merger and acquisition activity on the mainland will remain slow in coming months before some recovery in the second half of next year, according to PricewaterhouseCoopers. A wait-and-see stance by potential buyers and sellers amid the widening financial crisis had led to a drop in merger and acquisition deals in the country since July, and the sentiment was unlikely to improve until the middle of next year, PwC said yesterday. From July to last month, 543 merger and acquisition deals were announced on the mainland, a year-on-year slump of 47 per cent. Disclosed deal value totalled US$26.7 billion, half of the year-ago amount and the lowest since 2006, PwC said. Private equity deal volume plunged 58 per cent to 34 during the period, with the average deal size at less than US$100 million, a low level compared with previous years, it said. '[Private equity] buyers see this downturn as an opportunity, with valuation multiples coming down and fewer competition,' said David Brown, a PwC transactions partner. As buyers wanted to come in at a low price and the sellers were still not quite there, a 'valuation gap' had been created, he said. 'Nobody exactly knows what a realistic valuation of a company will be. I hope the gap will start to narrow sometime in the second or third quarter of 2009,' Mr Brown said. The mainland announced 32 outbound merger and acquisition deals from July to November this year, down 30 per cent from a year earlier. Transaction value fell 80 per cent to US$4.3 billion, PwC said. Xie Tao, PwC's transactions partner, said mainland companies still had money and government support to invest abroad. They were simply putting their activities on hold until global economic conditions became less volatile. 'Interest from Chinese companies in overseas acquisitions remains high, and more deals should be executed sometime next year as China is likely to recover faster with the rest of the world,' Mr Xie said. The main industries for Chinese acquisitions abroad were mining and financial services, with 22 and nine merger and acquisition deals announced respectively so far this year. PwC said the volume of deals in high-technology industries such as medical equipment, computer hardware and software, and biotechnology were increasing, reflecting a shift in the country's development focus to sectors with higher added value.