Switzerland

Details

  • Type: Press release
  • Date: 7/1/2014

Positive economic development boosts the Swiss M&A market 

In the M&A business, the first half of 2014 was characterized by high-value transactions while the number of mergers and acquisitions remained roughly on a par with the previous year. Compared to last year's restraint, the size of the deals we are now seeing points to a flourishing M&A market and KPMG also expects a general increase in M&A activities in the coming months.

Swiss companies were involved in a total of 153 deals both in Switzerland and abroad during the first half of 2014. Several of those transactions were valued at over USD 1 billion, a fact that both highlights the market's momentum and shows that the high volume was not merely the result of a few major events. With deals worth a total of USD 114.0 billion, the first half of 2014 even exceeds the record set during the first half of 2012 by USD 22.9 billion. Compared to the caution seen last year when the total value of deals reported during the first half of 2013 came to a mere USD 14.9 billion, the lowest it had been since the second half of 2009, indicators are now showing a truly flourishing M&A market.

 

Number and value of deals per half year

LafargeHolcim – merger between equals

Valued at USD 40.0 billion, the merger between Lafarge and Holcim was this half year's largest transaction and nearly on a par with the USD 40.2 billion deal between Glencore and Xstrata in 2012. The merger between these two cement groups clearly illustrates the trend toward bundling core competencies and winning synergies. Apart from Glencore and Xstrata, there have been two other comparable deals with Swiss involvement over the past five years: one of these was Novartis' acquisition of the remaining 75% stake in Alcon Inc. in 2010 worth a total of USD 41.2 billion and the other was Roche's takeover of the remaining 44.2% of shares in Genentech, which it had acquired for USD 44.3 billion at the peak of the financial crisis in the first quarter of 2009.

Novartis as an example of the trend toward portfolio streamlining

Strategically-driven efforts to streamline portfolios is another M&A trend. Corporations used the financial crisis as a time to prepare strategic optimization measures, the results of which are now being seen on the market. These companies raise funds by selling off non-core operations to enable them to invest in their core operations when the time is right. One prime example of this trend is Novartis which is currently working on streamlining its portfolio from the bottom up. The divestiture of its Animal Health Division to Eli Lilly for USD 5.4 billion, the sale of its vaccine division to GalaxoSmithKline Plc. (GSK) for USD 7.1 billion and the company's stronger focus on pharmaceuticals with its acquisition of GSK's oncology division for USD 16 billion are some of the significant transactions conducted during the first half of 2014. Novartis and GSK also launched a joint venture to strengthen their over-the-counter drug business.

 

Top Swiss M&A transactions from January to June 2014

 

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

Apr 2014

Lafarge SA

100

France

Holcim Ltd

Switzerland

 39'968

Apr 2014 Oncology Devision (GlaxoSmithKline PLC)

100

United Kingdom Novartis AG Switzerland

 16'000

Feb 2014 Share Buy-Back L'Oreal SA

8

France L'Oreal SA France

 8'235

Apr 2014 Division Vaccines (Novartis AG)

100

Switzerland GlaxoSmithKline PLC United Kingdom

7'100

May 2014 Las Bambas copper mine (Glencore International AG)

100

Switzerland Konsortium aus anonymen Unternehmen Unknown Investors

5'846

Apr 2014 Division Animal Health (Novartis AG)

100

Switzerland Eli Lilly & Co United States

5'400

Feb 2014 MultiPlan, Inc.

100

United States Partners Group Holding; Starr Investment Holdings, LLC Switzerland

4'400

Mar 2014 Commodities Unit (JP Morgan Chase)

100

United States Mercuria Energy Trading SA Switzerland

3'472

Jan 2014 Foster Wheeler AG

100

Switzerland Amec Plc United Kingdom

2'851

Jun 2014 The Nuance Group AG

100

Switzerland Dufry AG Switzerland

1'728

M&A as a strategic tool

Other interesting deals during the first half of 2014 include the public takeover of PubliGroupe by Tamedia and Swisscom which is currently underway with the aim of using the Local.ch and Search.ch Internet platforms to set up a Swiss alternative to Google, the international market leader. Oerlikon's acquisition of the Metco surface solutions segment takes the group a big step closer to global market leadership in this industry. Both deals illustrate the importance of M&A as a strategic tool for strengthening a business' market position and increasing market share.

Private equity momentum

The importance of private equity companies has also grown in the current market situation. One example of this is Dufry's USD 1.7 billion acquisition of the Nuance Group. Two private equity firms, GECOS and PAI Partners, acquired the company several years ago, developed it and then successfully sold it once the market had stabilized. With future prospects looking good and companies' stock prices at a high level, the timing is ideal for private equity companies to place assets from their portfolios up for sale on the market.

IPO window has opened up again

Driven by stock market confidence and the market upswing, IPOs are becoming increasingly attractive for Swiss companies, as well: Thurgauer Kantonalbank took the bold step of going public on 7 April 2014. Another example of a successful IPO is the SFS Group, an industrial company which has now been listed since 7 May 2014.

Insurers’ M&A activities as part of their overall strategy

Increasing economic and regulatory changes are prompting many insurance companies to rethink their business model. As they do so, they are tapping new markets like Africa and the Middle East or streamlining non-core business segments in order to generate profitable growth. M&A activities play a central role in their overall strategies. What's more, KPMG expects the second half of the year to bring a dynamic environment with further expansions to Latin America and Asia. Swiss Re's latest investments in Brazil, Colombia and China are one good example illustrating this trend. Other important M&A developments in the insurance industry are increasing activities by private equity companies and individual investors who are targeting well-established companies on the market. Factors behind this trend include rapid changes in technology as well as a lack of core infrastructure which is fundamental for the sector's continued development in many growth markets.

Private banks await IRS ruling

The situation on the financial market remains suspenseful. Several banks are still waiting for the IRS, the US tax authority, to reach a decision regarding the tax dispute. This is expected in the next few months. An increase in M&A activities is also anticipated following this decision. Since liquidity shortfalls at the banks concerned are mentioned as the main factor driving potential divestments.

Outlook for the second half of 2014 optimistic

The rising real gross domestic product (GDP), low interest rates and the SMI's positive price trend are indicators of a stable market environment that provides fertile ground for M&A deals. "Although companies' values are back up, it can be presumed that the M&A market will also remain active during the second half of the year and that the value of the transactions reported will also be high," says Patrik Kerler, Head of M&A at KPMG Switzerland, with conviction. "The rise in share prices following takeover announcements could also encourage this development. Shareholders reward acquisitions in the current market environment because they are confident that the acquisitions will put companies in a better position to exploit synergies which will then lead to an increase in the company's value over the medium term."
 

Simone Glarner

Simone Glarner

Head of Media Relations

+41 58 249 55 71

M&A Group

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