Swiss M&A activity trending upward in Q4/2012
In the fourth quarter of 2012, the Swiss M&A market experienced upward momentum compared to the prior quarter. With 165 announced M&A transactions, the number of deals in the fourth quarter increased by over 16 percent. Disclosed deal volume rose by approximately 86 percent. For the full year 2012, 606 transactions with an approximate disclosed deal volume of CHF 111b were recorded. Compared to 2011, this represents a decrease of 16 percent in terms of number of deals. However, deal volume more than doubled in 2012.
Zurich, 14 January 2013 – The significant rise in deal volume in 2012 in comparison to 2011 is largely attributable to Glencore/Xstrata’s announced mega deal in Q1 12. Nonetheless, excluding this transaction totaling CHF 49b, deal volume would have increased by about 21 percent in 2012 compared to the previous year. Jürg Stucker, Head Mergers & Acquisitions at Ernst & Young Switzerland, says: « M&A activity picked up in the fourth quarter of 2012. 165 announced M&A transactions with a total disclosed deal volume of about CHF 10b represent an increase of about 16 percent and approximately 86 percent compared to Q3 12, respectively. Thanks to ongoing stabilizing measures by the European Central Bank, market slowly regained some confidence in future growth prospects ».
SMI continued its upward trend
As in Q3 12, the Swiss Market Index (SMI) continued its upward trend, ending with a gain of more than three percent in the fourth quarter 2012. Following the SMI’s annual low in June 2012, markets recovered its losses incurred in the first half year of 2012. All in all, the SMI closed with a solid double-digit 12-month performance of around 13 percent in 2012, despite the European debt crisis and uncertain economic climate.
Except for Energy, Transportation and Utilities, all of the equally-weighted industry sectors achieved a positive stock performance in 2012. For the last twelve months, the best performing industry was Industrial Goods & Services with an increase of about 15 percent mainly due to exceeding earnings expectations of several industry players followed by the Healthcare sector, reaching a positive performance of about nine percent.
«Industrial Goods and Services» top M&A sector in terms of activity
In the last quarter of 2012, Industrial Goods and Services was also the most active industry regarding the number of M&A transactions, which accounted for about 20 percent of all deals; followed by Media, Technology and Telecommunication and Chemicals, Construction and Materials which contributed 16 percent and 13 percent, respectively. The three top sectors together represented almost half of all Swiss-based M&A transactions in Q4 12.
Increasing number of transactions above CHF 50m
During the last three-month period, mid-market transactions between CHF 50m and CHF 250m increased from 34 percent in the third quarter to 40 percent in Q4 12; while smaller transactions with disclosed deal size below CHF 50m decreased from 48 percent to 30 percent in the fourth quarter of 2012. Large transactions with an announced deal size of over CHF 250m were also on the rise and accounted for 30 percent of the total number of transactions with disclosed deal volume, up from approximately 20 percent in Q3 12.
As long as the Euro zone crisis remains unsolved, it will continue to be one of the dominating factors for moderate Swiss M&A activity in 2013 and hamper the risk appetite of potential buyers. Louis Siegrist, Managing Partner, Head Transaction Advisory Services at Ernst & Young Switzerland says: « As a result of the current volatile economic climate, management boards are not expected to pursue risky M&A strategies, but rather continue to accumulate cash on balance sheets. »
Due to the ongoing European trough though, companies from overseas, in particular in Asia, are looking to acquire distressed European targets at low valuations. This might also affect domestic M&A activity, as some export-oriented Swiss companies are still suffering from margin pressure and, hence, could also become potential takeover targets if economic conditions worsen.
In view of the sovereign debt crisis, an ailing global economy and accelerating austerity measures by many European countries, M&A activity in Switzerland throughout 2013 is expected to remain on modest level. Nonetheless, as the Swiss economy shows a relatively stable economic outlook, a slight upward trend in deal activity might be possible if supported by an overall European economic recovery.
About Ernst & Young’s M&A Quarterly Switzerland
Ernst & Young’s Merger & Acquisitions Quarterly Switzerland is a publication summarizing the M&A market activity in Switzerland across various industry sectors. The objective of this publication is to provide an overview of the M&A market, valuation metrics, events and acquisition opportunities. This is the seventeenth edition in the series, which began in December 2008.
- Download News Release (118 KB)
- Download Study «Mergers & Acquisitions Quarterly Switzerland» (4.3 MB)
Brief portrait of Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 167,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. In Switzerland, Ernst & Young Ltd is a leading audit and advisory company offering services with about 2,000 employees at 10 locations also in the area of tax and legal, as well as in transactions and accounting. For more information about our organization, please visit www.ey.com/ch
Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited (EYG), each of which is a separate legal entity. EYG, a UK company limited by guarantee, does not provide services to clients.