China’s crackdown on tech sector could cool M&A activity after first-half deals soar, PwC says
- Uncertainty created by crackdown has caused some deals to pause
- Technology was the second biggest sector by volume for merger activity in the first half of the year
Concerns about an ongoing regulatory crackdown on China’s technology sector is starting to weigh on merger activity and could slow down what has been a bumper year for domestic deals, according to PwC.
The volume of domestic deals by strategic buyers in the first half surged to its highest level since early 2018, with 2,753 transactions raising US$145.6 billion, the audit and consulting firm said. That represented a 41 per cent increase from the latter half of 2020 and a nearly 7 per cent increase from the first half of last year.
The tech sector also was the second highest industry for strategic deals in China in the first half, representing 17 per cent of all transactions, according to PwC.
However, the recent crackdown on technology and online tutoring firms has made the world less predictable for investors and deals around those high-growth sectors, said David Brown, Asia-Pacific deals leader at PwC.
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“At the moment, people are not quite sure where this is going. You see the asset prices bouncing around and that’s indicative of the fact there’s a lot of uncertainty,” Brown said at a press conference on Wednesday. “Uncertainty is generally the enemy of M&A because you can price agreement. You can’t get transactions to happen. People just press the hold button.”