Switzerland

Details

  • Type: Press release
  • Date: 10/14/2013

Swiss M&A market: The calm before the storm? 

The trend continues: Activity on the Swiss M&A market remained moderate during the third quarter of 2013, as well. Both the value and the number of transactions declined noticeably compared to the same period of the previous year. Swiss companies had thus conducted mostly small deals in Switzerland and abroad. KPMG expects the last quarter of the year to bring increased activity on Switzerland’s M&A market.
During the third quarter of 2013, Swiss companies were involved in 71 deals in Switzerland and abroad, with transactions reaching a total value of USD 3.4 billion. In a year-on-year comparison, this represents a 27% decline in the number of transactions conducted and approx, a 68% drop in the value of those transactions. As was already the case during the first half of 2013, most mergers and acquisitions were conducted in two sectors, Industry (18.3%) and Financial Services (16.9%). The third quarter’s most impressive transaction, however, was observed in the transport sector: Swissport International AG, the world’s largest provider of ground and cargo services to airlines and airports, took over Britain’s Servisair UK Ltd. for USD 598 million.

Uncertainty on the financial market

Conditions were essentially right for increased M&A activity during the third quarter: A large amount of debt continues to be available on the Swiss market and the past few months brought positive developments on the stock exchange. Nevertheless, no increase in transactions was registered – on the contrary: Investors continued to remain cautious; while potential takeover targets as well as divestments were discussed, they continued to wait for the right time to make their move.

 

Whether to invest in a company or sell off parts of it is a decision based on mid- to long-term strategies. The market outlook and expected growth play a pivotal role in this. In light of uncertain market developments in Europe, companies are, however, cautious and are performing in-depth analyses to determine whether an investment would be worthwhile at sustained high prices. Against that backdrop, it comes as no surprise that some negotiations were called off during the third quarter because the parties involved disagreed about the company’s value.

US trend continues

After more than two years of increased activity on the M&A market between the US and Switzerland, this trend still continues unabated. Even in the third quarter, some seven of the ten top deals took place between these two countries. The Colfax Corporation provided the largest transaction: The industrial company acquired Fläkt Woods Group’s Global Infrastructure and Industry Business for USD 254 million.

 

The US has become a popular investment target for Swiss companies due to cultural proximity and manufacturing costs that are now comparable with those in China, thanks to a high degree of automation and low labor costs. Many segments of the US market are also growing at an above-average rate. The American government’s current administrative shutdown is, however, making investors nervous. Already tense, the financial market is becoming alarmed and for the first time, China has publicly expressed that a quick resolution to the dispute should be sought.

Outlook on the global market

The global M&A market reported more activity in comparison to the local market. The USD 4.8 billion takeover of smartphone manufacturer BlackBerry by Canada’s financial services provider Fairfax Financial, as well as the acquisition of Kabel Deutschland by the Vodafone telecommunications group in Great Britain for EUR 7.7 billion, attracted a great deal of attention. Nevertheless, mega-transactions worth ten billion or more were not to be found at the global level, either.

Outlook on the global market

Experience has shown that the fourth quarter brings high volumes and that considerably more deals are announced during this period of time than the third quarter. Looking ahead to the near future, we see two basic factors that could impact developments on the local M&A market in the short term. One of these is what seems to be continued economic recovery in the European Union, the other is the fact that a stabilization of financial markets (particularly in the US) could calm market players and encourage acquisition efforts.

 

All in all, Swiss companies are even more well positioned than usual, to continue to grow. Their strong competitive edge and good employment conditions, as attested by the “Human Capital Report” compiled by Switzerland’s World Economic Forum (WEF), have put the country in an ideal position to conduct strategic international transactions. KPMG then also anticipates an exciting fourth quarter which could yield some interesting deals depending on how the economy develops. In the medium term, activities on the Swiss M&A market can be generally expected to increase slightly, particularly in the financial sector as well as in the technology, media and telecommunications sector (TMT).

 

For more information as well as detailed diagrams, please go to

M&A Report

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The quarterly report provides an overview of the M&A activities in Switzerland.
 

Simone Glarner

Simone Glarner

Head of Media Relations

+41 58 249 55 71

M&A Group

We combine many years of global and national experience in M&A lead advice, due diligence, valuation, M&A tax and legal M&A with specific expertise in many industries.
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