Constant activity in the Swiss M&A market
According to a study by KPMG, the Swiss M&A market has remained stable over the past six months. Although the transaction volume decreased by 7% compared to the previous year, the number of transactions remained almost unchanged at a high level.
In the first half of 2017, the number of corporate transactions decreased only marginally year-on-year from 164 to 160. Overall, the value of all transactions declined by 7% to USD 69.3 billion (2016: USD 74.2 billion), with the acquisition of Syngenta by China National Chemical Corporation primarily responsible for last year's high transaction volume. No strong increase in transactions is expected for the second half of the year due to the ongoing financial policy uncertainties.
The M&A year 2017 has been characterized by a major transaction: In January, the US pharmaceutical and consumer goods manufacturer Johnson & Johnson announced its intention to acquire the Swiss biotechnology company Actelion for USD 30 billion. This, after initial talks in December 2016 had still failed. This is the second major transaction in the Swiss M&A market within a year, following the acquisition of Syngenta by China National Chemical Corporation in 2016. The deal ranks among the five largest Swiss transactions of all time.
Private equity activities and company acquisitions abroad
In principle, the outlook for the global economy remains positive. The currently still favorable interest rate environment also makes money available for M&A activities. Private equity investors in particular, which typically have a high proportion of debt, are currently benefiting from this. Thus, the Swiss M&A market also saw relevant private equity activity in the first half of 2017: Of the ten largest transactions, no less than three featured a private equity buyer.
Due to the persistently strong Swiss franc, company acquisitions abroad remain attractive. These have always been an important strategic component for Swiss companies, which can use them to diversify their sales markets and product portfolio.
Chinese investment appetite continues
Chinese M&A activities have slowed down a bit, in particular due to the new legal capital export legislation in China, but are still strong in international comparison. Accordingly, the Chinese appetite for investment opportunities continues in Switzerland. The HNA Group is particularly active in the local market: The group has already acquired three Swiss companies in the past, namely Gategroup, SR Technics and Swissport. In the first half of 2017, the HNA Group secured two further essential transactions: The Chinese took a 17% stake in travel retailer Dufry for USD 1.4 billion, and acquired a majority stake in Glencore's petroleum and logistics division for USD 775 million, although the latter transaction only just failed to make it into the top 10.
Fiscal policy uncertainties as a constraining factor
The development of financial policy currently remains one of the most important factors influencing transaction business: Despite an interim calming of the situation, geopolitical instability and developments in the EU and the USA are putting the brakes on companies' desire to make acquisitions. Brexit in particular, with its still unclear economic and legal impact on the M&A market, remains a factor of uncertainty. "Despite positive economic developments and high activity levels, strong growth in the national and international M&A market is not to be expected in the short term due to financial policy uncertainty and a possible turnaround in interest rates," says Patrik Kerler, Head of M&A at KPMG Switzerland, assessing the situation.
Source: KPMG Switzerland
