Switzerland

Details

  • Type: Press release
  • Date: 1/15/2014

Swiss M&A market: 2014 expected to be an active year 

At first glance, 2013 did not appear to be a particularly active year on the Swiss M&A market. Both the number of mergers and acquisitions as well as the value of those transactions declined significantly in comparison with 2012: According to the «M&A Yearbook 2014» published by KPMG Switzerland, a total of 315 deals were recorded (-10.5%) worth a total of USD 33 billion (-71%). A closer look, however, reveals that 2013 was a year of reorganization and planning for many companies. As a result, KPMG expects a renewed increase in M&A activity during 2014 and that this will also include the conclusion of complex, carefully prepared deals. Specifically, greater activity is anticipated among industrial, chemical and pharmaceutical companies as well as financial service providers.

Last year’s largest deal was the sale of a credit portfolio by Belgium’s Royal Park Investments to Credit Suisse Group AG and Lone Star, a US private equity firm. Valued at just under USD 3 billion, this transaction’s structure is not comparable with the megadeals of previous years (Glencore/Xstrata in 2012, Johnson & Johnson/Synthes in 2011 and Novartis/Alcon in 2010). Sustained uncertainty on markets in the eurozone and the USA was joined by worries of slowed growth in China and the stubbornly strong Swiss franc. Investors were cautious as a result and no major deals were conducted on the Swiss M&A market.

 

Number and value of deals per year

Preparing for future activities

 

A closer look at the supposedly quiet M&A market is worthwhile. Far-reaching efforts to refocus and restructure as well as detailed plans for future expansions topped the agendas of numerous companies. Their own portfolios were reassessed and any business areas which did not form part of their core business or which were not turning a sufficient profit were identified for sale. These activities were particularly intense at industrial, chemical and pharmaceutical companies as well as financial service providers. In light of this, 2013 can be considered a year of preparation. Many companies might have continued looking for growth opportunities, yet acquisitions were largely restricted to targets that fit into their core competences, strengthened their main business or improved their own company’s position with regard to expansion plans. Noteworthy in this respect were several sales by Clariant as well as the large-scale sale by Novartis of the company’s blood transfusion diagnostics unit to Spain’s blood products maker Grifols (worth USD 1.7 billion, making it the largest deal in the fourth quarter of 2013).

Top Swiss M&A transactions 2013

 

Announced date Target Stake Target country Bidder Bidder country Value (USDm)

Apr 2013

Royal Park Investments NV/SA (debt portfolio)

100

Belgium

Credit Suisse Group AG; Lone Star Fund VIII (U.S.), L.P.

Switzerland

 2,998

Jun 2013 SGS SA

15

Switzerland Serena Sarl (Groupe Bruxelles Lambert SA) Belgien

 2,608

Apr 2013 Terminal Investment Limited SA

35

Netherlands Global Infrastructure Partners United States

 1,929

Nov 2013 Novartis AG (Blood transfusion diagnostics unit)

100

Switzerland Grifols SA Spain

 1,675

Mar 2013 AmerisourceBergen Corp

8

United States Walgreen, Alliance Boots Switzerland

1,167

Apr 2013 Power-One Inc

100

United States ABB Ltd Switzerland

1,112

Oct 2013 Clermont Mine

50

Australia Glencore Xstrata plc; Sumitomo Corporation Switzerland

1,015

Oct 2013 MMX Porto Sudeste Ltda.

65

Brazil Trafigura Beheer B.V. Switzerland

 1,000

Jan 2013 Harry Winston Inc

100

United States Swatch Group SA Switzerland

 1,000

Jul 2013 Schmolz + Bickenbach AG

60

Switzerland Renova Group of Companies Russia

 115

 

Shift in the focus of commodities trading

 

While commodity trading companies called attention to themselves in 2012 with a host of large-scale deals, this phase of megadeals seems to be over for the time being. The most prominent transaction was the USD 1.02 billion joint acquisition by Glencore Xstrata and Sumitomo of a stake in the Clermont coal mine. Market players spent more time in 2013 adjusting their M&A strategies and increasing their trade margins. Many companies focused on vertical integration which not only requires that the supply of raw materials be secured but also calls for logistics systems and infrastructure. In this respect, the sector remains significant for takeover activities abroad and, particularly in light of the size of the market players, individual deals of a larger scale as well as acquisitions of shareholdings remain conceivable. It is important to note, however, that structural restrictions also exist since only a limited number of companies are domiciled in Switzerland that have the financial strength and size necessary to conduct such megadeals.

 

Consolidation in the banking sector

 

Frequently a topic of speculation, consolidation in the private banking sector became a reality in 2013: The number of institutions with a Swiss banking license dropped 18%, from 171 (2009) to 141 (2013). While the large players’ global strategies still call for expansion and even medium-sized private banks are attempting to strengthen their position by means of size, small institutions find themselves facing immense challenges. Difficult conditions on the market, the impact of the US tax program and increasingly complex regulatory requirements represent hurdles, in some cases insurmountable, for the business models of these small players. It is extremely likely that other private banks will also disappear from the market. Consolidation will continue to progress substantially in 2014, as well.

 

Number of deals per industry sector 2013
Transaktionen pro Sektor

Consumer goods: Slower market growth

 

Swatch, the Swiss watch group, conducted the largest acquisition in the consumer goods market in 2013 with its purchase of a 100% stake in America’s Harry Winston jewelry and watch business. Due to slower growth in demand on key markets like China, the outlook for Swiss providers of luxury goods and precision engineering is somewhat uncertain. As a result, many players will probably continue to precisely analyze their business operations in 2014 in order to bring their strategies in line with the new reality and ascertain where growth can be expected on the consumer market in the future. The continued importance of emerging markets still should not be underestimated, either. Demand for high-quality Swiss products and services can be expected to remain high in the future, as well. Swiss companies will also strive to increase their proximity to customers and show an interest in making global acquisitions on a large scale. One initial hurdle will be the extremely limited number of acquisition targets available.

 

Better financing terms and conditions

 

A renewed appetite for M&A activities and IPOs is being observed in various industries around the world; one of these is the US technology sector. Unlike in Switzerland, multiple megadeals were registered at the global level, particularly in the telecommunications sector. In Switzerland, too, M&A remain an indispensable strategic tool for large companies. Merger and acquisition plans are being buoyed by the fact that it is becoming increasingly easy to secure the necessary financing. Banks are proving more open-minded and providing funding for promising deals. Moreover, 2013 brought successful rounds of financing at some of Switzerland’s largest private equity firms which investors perceived as positive. As stock markets continue to rise – in many cases to record highs – valuation multiples for transactions also increase.

 

Growth expected in 2014

 

In light of these developments, it can be presumed that 2014 will be a more active year again in terms of M&A. Most Swiss companies have already made a great deal of progress on portfolio assessments and the reserves which this optimization has freed up can certainly be used for M&A transactions over the course of the next twelve months. A number of Swiss private equity firms also have sufficient capital that could be used for investments. Financing should become more readily available, too, once global markets stabilize and uncertainty factors are reduced.

 

«Switzerland will experience another age of megadeals,» Patrik Kerler, Head of M&A at KPMG Switzerland, is convinced. «Indications to that effect were already observed in the fourth quarter of 2013 with deals valued at USD 9.7 billion, twice what was seen during the previous quarter.» One source of danger, however, could lie in inflated valuations which lead to corrections on stock markets and could thus have an adverse impact on both general M&A activity and the general mood. «In the absence of this, nothing stands in the way of at least a moderate increase in the total value of mergers and acquisitions,» says Kerler.
 

Simone Glarner

Simone Glarner

Head of Media Relations

+41 58 249 55 71

M&A Yearbook

rollup image ma yearbook
The "M&A Yearbook" provides an overview of the mergers and acquisitions in Switzerland over the last year well as an outlook for the coming year.

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.
Twitter  Facebook  xing  YouTube  KPMG Blog