Switzerland

Details

  • Type: Press release
  • Date: 1/15/2013

USA as driver in strong Swiss M&A business 

Compared to the previous year, 2012 brought an increase in both the number and particularly the value of mergers and acquisitions with Swiss involvement. That is one finding revealed in KPMG’s ‘M&A Yearbook 2013’. Over the course of the year, 352 transactions (+11%) were conducted with a total value of USD 116 billion (+56%). Numerous companies concentrated on North America. Apart from commodity trading companies, Swiss industrials proved to be particularly active. KPMG expects another slight increase during the current year as the result of external factors.
Global trends such as clearly growing confidence in a recovery of the US economy, political and economic developments in China and the Asia-Pacific region and, last but not least, turbulent events in the eurozone have had a strong impact on M&A activities in Switzerland. In fact, considerably stronger than in other countries where M&A markets are still weaker. The local economy continues to experience stable growth rates and more companies than last year have taken advantage of the opportunity to improve their strategic positioning through M&A.

 


Despite a strong 4th quarter in 2012, the record transaction level of the first quarter (94 deals worth USD 59.6 billion) which included Glencore’s announced takeover of Xstrata for USD 40.2 billion could not be repeated: The 85 transactions which took place during the final quarter reached a total value of USD 14.9 billion. Compared to previous years, 2012 as a whole has still brought a clear increase, with regard to both the number of deals as well as the value of those transactions, in particular.

 

Number and value of deals per year

Number and value of deals per year

Commodity trading companies in the spotlight

Glencore’s major acquisition of Xstrata created a stir around the world. The USD 40.2 billion deal has shown that size is becoming increasingly important in this industry. Glencore conducted a number of other noteworthy transactions, in addition: The company took over Canada’s Vieterra for USD 6 billion in March and in September it boosted its stake in Kazzinc, a mining company in Kazakhstan, by 19% to a total of 70%. The commodity trading company Gunvor was also able to conclude a large number of deals. These included the acquisition of an oil refinery from Petroplus in Ingolstadt, Germany, which was just recently concluded as well as another refinery in Antwerp at the beginning of the year.

Top 10 Swiss M&A transactions 2012

click on image to enlarge

Attractive healthcare-pharmaceutical intersection

High levels of activities were also seen in the consumer goods market where it intersects with the pharmaceutical industry. Especially attention-grabbing is Nestlé’s USD 11.8 billion takeover of US baby food producer Pfizer Nutrition which is particularly well-established in emerging markets. The decision by US-based Walgreen Company to increase its stake in Alliance Boots GmbH, a pharmaceutical company located in Switzerland, to 45% can also be attributed to this industry.

 

USA instead of Europe

Especially in the industrial sector and the area of commodity trading, the uncertain economic situation in the eurozone has prompted many companies to shift their focus to countries abroad where they have boosted their presence not only in North America, in particular, but also in Asia as has been the case in past years. Energy and infrastructures seem to be especially attractive areas of growth in the US. For USD 5.2 billion Tyco Flow Control, for instance, acquired a majority stake in Pentair, a US corporation that specializes in water pump, filter and control systems. In this context, ABB should also be mentioned: For a price tag of USD 3.9 billion, this provider of power and automation technology purchased Thomas & Betts Corp., an electronics group also domiciled in the US. The Vieterra takeover mentioned fits this pattern, as well.

Number of deals per industry sector 2012

Number of deals per industry sector 2012

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    Financial sector cautious

    In comparison, the financial sector reports a quiet M&A year. Due to ongoing efforts toward strategic realignments, the largest financial groups have not yet stepped forward with any major transactions. Deals by Julius Baer attracted attention, particularly its purchase of the non-US portion of Bank of America Merrill Lynch’s wealth management business. Also noteworthy are the USD 1.3 billion in acquisitions announced by ACE, an insurance company based in Switzerland, with the intent of strengthening the company’s presence in Mexico and Indonesia.

     

    Outlook: 2013 to be eventful

    In the search for growth and profitability, 2013 will prove to be a year of outward focus for the Swiss corporate landscape with more frequent restructuring efforts and accelerated globalization. The financial and electrical industries are still in the midst of fundamental upheaval and will form new structures through M&A. All things considered, KPMG expects another slight increase in M&A activities in Switzerland in 2013. It is unlikely, however, that the value record (set by Glencore/Xstrata) will be broken again. Confidence in a continuation of the Swiss economy’s positive development as well as the possibility of recovery in the eurozone will have an increasingly positive impact on Switzerland’s M&A market.

     

    • Following a period of refocusing and on the basis of their new strategies, the willingness of universal banks to acquire and sell companies and parts thereof will be back on the rise. There will also be an increase in client portfolio acquisitions in the area of wealth management. Insurance companies will intensify their focus on growth markets. Independent asset managers are likely to become the target of a greater number of acquisitions since a variety of regulations have made the market ripe for consolidation.

     

    • It can be assumed that the commodity trading companies located in the greater Geneva area and Central Switzerland will continue to gain mass in 2013, as well. The tendency toward centralization and diversification in their areas of activity along their value chains will also continue this year. Increasing political pressure on Switzerland’s attractive tax system – which has encouraged the relocation of numerous international commodity groups – and possible changes to this system could soon have an impact on the structure of this industrial branch, however, and influence the value of M&A transactions in Switzerland over the course of the next three years.

     

    • Pharmaceutical companies will continue to be active players on the market. Price pressure, regulatory changes and expiring patents will force the sector to grow in new segments. Providers of generic products will be attractive acquisition targets in 2013, as well.
 

Andreas Hammer

Andreas Hammer

Director, Head of Corporate Communications

+41 58 249 55 71

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