Populism: Scourge of resistance to M&A

cent year-on-year.

“Besides tougher requirements by the regulatory authorities, the global political and economic landscape has been undergoing a new round of rebalancing, with increasing external uncertainties,” said Chen of PwC.

“After the blistering growth in 2016, there will be an obvious decrease in overseas acquisition deals this year and the recovery will come in 2018.”

Toby Gibb, investment director of European equities at Fidelity International, said the rise of populism has caused many national governments to be much more sensitive to foreign investments, especially in key industries.

This is proving to be a limiting factor for global investors, Chen Chao, including those from China, looking for overseas M&A’s. So, Europe and the United States will continue to be their key destinations because of their advanced industry, technology and brands, said Wang Peng, a partner at PwC China.

In 2016 and the first quarter of this year, nearly 60 percent of deals secured by mainland companies were in the European and US markets, according to the PwC report.

Hu Bing, co-CEO and president of Russia-China Investment Fund, said as bilateral relations between Russia and China continue to flourish, and cross-border trade is expected to increase significantly in the next couple of years, many Chinese companies and financial institutions are going to Russia to seek M&A’s.

But Gibb of Fidelity said Chinese investors would face uncertainties in Europe.“If valuations of assets in Europe rise and if the euro rises, they could be limiting factors for M&A, which are still sentiment-driven. We still have Brexit and the Italian election next year, so we don’t know how their results would influence M&As.”

In terms of deal value, entertainment was the most popular sector among Chinese private enterprises in 2016. It was followed by finance, intelligent manufacturing and the high-tech sector.

Energy and power, finance and industrial products were popular among SOEs last year, PwC said in its report.

Chen said companies engaged in agriculture, machinery equipment, energy and aircraft manufacturing will be key M&A targets for Chinese players this year.

He said in the short term, listed Chinese companies overseas and dollar-dominated private equity funds will have an advantage over investors holding only RMB assets in outbound M&A’s.

There will be an obvious decrease in overseas acquisition deals this year ...” director of transaction services at PwC China