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.
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.
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.