The Swiss M&A market reported 74 transactions in Q1 2012, virtually unchanged from the corresponding period of the previous year (Q1 2011: 75 transactions). By contrast, the volume of transactions increased significantly over the same period: at USD 53 billion, the figure is considerably higher than in previous years. In particular, this trend is being driven by Glencore’s public takeover of Xstrata, announced in February, in a transaction worth USD 40 billion. Even excluding this deal, however, the transaction volume of USD 13 billion still represents a high level.
Number and Volume of Transactions Q1 2012
Focus remains on commodities companies
Glencore’s public takeover of Xstrata, which is expected to be completed in Q3 2012, reflects the growing importance of the commodities industry for the Swiss economy and the M&A market. Over the past few years, numerous other commodity firms and commodity trading companies have joined Glencore, which has been based in Switzerland for a long time now, in locating their businesses in the country – particularly in the cantons of Zug, Geneva and Lausanne. They coordinate their operations and their M&A activities from their Swiss bases. Glencore made four other acquisitions in Q1 2012 besides Xstrata, purchasing the Canadian agribusiness Viterra and the Ukrainian agribusiness Kolos, and taking stakes in the Canadian mining company Trevali Mining Corporation and in Optimum Coal, a South African coal-mining business. These deals saw Glencore lead the Swiss transaction market in the past quarter. The potential acquisition of Illumina by Roche has not been included as the outcome is not yet known.
Top 10 M&A Transactions Switzerland Q1 2012
Hesitant trend for bank sector transactions
Following a large number of transactions in Q4 2011, Q1 2012 saw significantly fewer transactions in the banking sector, although there were a series of smaller-scale transactions in related areas of the finance industry. The restructuring of Lugano as a financial center continued with the sale of CMB and Arkos. There has also been a noticeable trend among major banks toward streamlining and focusing their structures: Examples include the planned sale of swisspartners by the LLB and the sale of EFG’s Danish subsidiary. Certainly the most interesting transaction of this kind was the sale of Wegelin to Raiffeisen, resulting as it did from the further escalation of the tax dispute between Switzerland and the USA.
Swiss companies report strong purchasing activity
Also noticeable is the high percentage of purchases being made by Swiss businesses. They were responsible for 69% of transactions (45% with foreign, 24% with Swiss acquisition targets), whilst takeovers of Swiss companies or subsidiaries of Swiss companies by foreign buyers made up only 31% of the transactions conducted. Although statistics from KPMG Yearbooks of previous years have already indicated that Swiss companies are more often the purchaser than the target in transactions of this kind, the extent of this difference in Q1 2012 is nonetheless remarkable. The current strength of the Swiss franc has no doubt had a degree of influence in this regard.
Japan showing an appetite for acquisitions
Of the companies that took over Swiss-based targets in Q1, 15% were Japanese. The Japanese domestic market has been in the doldrums since the late 1990s. At the same time, many Japanese companies have substantial liquidity reserves to help them on the hunt for growth, primarily in foreign markets and particularly via M&A transactions. The earthquake in 2011 and the aftermath of the Fukushima disaster have further reinforced this trend. The Japanese see Swiss companies as particularly attractive targets for takeovers due to corporate factors such as their high-quality positioning and international focus as well as cultural similarities.
Number and Origin of Targets
M&A market remains lively
Positive stock market trends may suggest that the growth of the M&A market will continue, although KPMG is expecting volatility to also remain high in future. At the same time, KPMG is anticipating more M&A activity both in the commodity (trading) sector and the financial industry. In the financial services sector, the wave of consolidation is expected to continue growing in step with regulatory requirements. Major uncertainties in the political and regulatory sphere as well as ongoing economic challenges are making the situation even more difficult for the banks.
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