EY’s «Mergers & Acquisitions Quarterly Switzerland»
Swiss M&A deal activity weakened in Q1 2013
After a promising upward trend in Q4 2012, the Swiss M&A market recorded relatively weak deal activity in terms of volume as well as number of transactions in the first quarter of 2013. When compared to Q4 2012 and Q1 2012, the number of 132 announced transactions in Q1 2013 represents a decrease of about 20 percent and 16 percent, respectively. With regards to disclosed deal volume, figures declined by more than half to roughly CHF 4.7 billion compared to the previous quarter. Even though growth is now back on the decision makers’ agenda, only a few executives expect to make the first step.
ZURICH, 30 APRIL 2013 – The decline of disclosed deal volume by approximately 54 percent compared to the previous quarter is mainly explained by the absence of the announcement of large transactions with Swiss participation. Beat Dolder, Head Mergers & Acquisitions at EY Switzerland, says: «Swiss M&A activity recorded a slowdown in the first quarter of 2013 resulting in 132 announced M&A transactions with a total disclosed deal volume of about CHF 4.7 billion. Ongoing debates about the future of the Euro and significant austerity measures in many European countries seemed to have dampened Swiss M&A activity.»
«Industrial Goods and Services» top M&A sector in terms of activity
During the first quarter of 2013, «Industrial Goods and Services» was the most active industry regarding the number of M&A transactions accounting for about 17 percent of all deals; followed by «Retail and Consumer Products» and «Media, Technology and Telecommunication», which contributed 15 percent and 14 percent, respectively. The three top sectors together represented almost half of all Swiss-based M&A transactions in Q1 2013.
Increasing number of transactions below CHF 50 million
Transactions with disclosed deal size below CHF 50 million increased their share significantly from 30 percent in the last quarter of 2012 to 38 percent in Q1 2013; whereas mid-market transactions slightly decreased from 40 percent to 37 percent. As a consequence, large transactions with announced deal size of over CHF 250 million declined from 30 percent to 25 percent. Deal size was disclosed in about 18 percent of all transactions announced in the first quarter of 2013.
From a global point of view, senior executives from large companies around the world showed a clear rebound in corporate confidence, according to EY’s most recent Global Capital Confidence Barometer. However, these positive expectations have not yet been translated into capital investments and M&A activity. While 72 percent of executives that participated in the study expect global M&A activity to rise, only 29 percent plan an acquisition of their own in the next twelve months. This could be called a «confidence paradox» or «ambition gap». However, this risk aversion could become the risk itself: Competitors seizing first-mover advantage will gain market shares; while waiting could lead to higher prices for acquisitions.
For Switzerland, slow growth in Europe’s economy paired with a strong Swiss Franc remain the dominating factors hampering Swiss M&A activity. Louis Siegrist, Managing Partner, Head Transaction Advisory Services at EY Switzerland says: «Despite moderate Swiss deal activity during the first quarter of 2013, Swiss companies may increasingly pursue M&A strategies in order to participate in still buoyant emerging markets and to compensate for sluggish growth in Europe for the coming quarters in 2013.»
Another factor which might fuel deal activity in Switzerland is the ongoing divestment of non-core assets and portfolio rebalancing of many industrial companies to realign their business strategies. For instance, OC Oerlikon Corporation AG successfully restructured its business divisions after several years of struggling. The high-tech industrial group is now in the position to seek strategic acquisitions. AFG Arbonia-Foster-Holding AG is currently selling its non-core activities to reposition itself as a pan-European construction materials supplier.
Given that the European economy is recovering further and that senior executives might translate their corporate confidence into M&A activity, an upward trend in Swiss M&A activity in 2013 might be possible.
About EY’s M&A Quarterly Switzerland
EY’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 eighteenth edition in the series, which began in December 2008.
About the Global Capital Confidence Barometer
EY’s Global Capital Confidence Barometer is a survey of over 1,000 senior executives from large companies around the world and across industry sectors. The objective of the Barometer is to gauge corporate confidence in the economic outlook, to understand boardroom priorities in the next 12 months, and to identify the emerging capital practices that will distinguish those companies that will build competitive advantage as the global economy continues to evolve. This is the eight half-yearly Barometer in the series, which began in November 2009.
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