Chinese investors cautious about M&A, but private equity still hunting for long-term returns
- In current environment, investors are keen on sectors that are more resilient and less cyclical, BDA Partners executive says
- Private-equity dry powder has doubled to around US$600 billion in three years, and PE involvement in M&A has more than tripled, according to PwC
A slowdown in economic growth domestically, Beijing’s persistence with zero-Covid policies and geopolitical tensions have made investors cautious, said Anthony Siu Yanhong, a Shanghai-based partner at BDA Partners.
“In the current environment, investors are keen to invest in sectors which are more resilient and less cyclical,” Siu said, adding that high-quality assets with stable growth and profitability are still attracting strong private-equity interest.
Caution among Chinese investors is significant because China M&A deals made up more than half of such deals in Asia-Pacific in the first half of 2022, according to EY. Asia-Pacific M&A deal volumes are growing and its share of the global total continues to increase over time, according to a recent report by PwC.
This trend has been driven by sizeable private-equity dry powder, which has doubled to around US$600 billion in the past three years, PwC said. Private-equity involvement in M&A has more than tripled to nearly 40 per cent of all deals in the region, it added.
“There is a change of risk appetite, from chasing hyper growth to strong cash-flow businesses where they can withstand a prolonged period of economic slowdown and [which] will be in a strong position to gain market share when the global economy recovers,” Siu said.