5 minute read 22 May 2022
digital transformation processes

Q1 2022: How did the Swiss valuation parameters and the European M&A volume develop?

Hannes Schobinger
By Hannes Schobinger

Partner, Leader Valuation, Modeling & Economics | EY Switzerland

Passionate about corporate finance.

Contributors

Marc Filleux

5 minute read 22 May 2022
Related topics Strategy and Transactions
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Valuation Market Essentials Switzerland - what key highlights did we observe in Q1 2022?

In brief
  • In Q1 2022, the EBITDA trading multiples (median values) declined in all non-financial sectors, although currently based on the December and September 2021 financials for the majority of the companies.
  • In overall, the EBITDA trading multiples followed a declining trend over the course of the past year, leading to generally lower multiples, as compared to the same quarter last year. The main exception to this declining trend was the increase in the median multiples in Q4 2021 for all sectors, except for IG&S, which we see now based on the most recently available year-end financials. 
  • The total number of transactions in the European M&A market declined to 165 in Q1 2022, which is 25% less than in Q4 2021. 
  • The EUR and CHF risk-free spot rates became positive during Q1 2022 driven by the geopolitical situation in Europe. 
  • Despite the jump in the spot rate, the five-year historical average of the EUR risk-free rate declined below zero in Q1 2022. 
  • The five-year historical average for the CHF risk-free rate increased slightly as compared to the same quarter last year, although remaining negative.
  • Driven by the same geopolitical developments, the USD risk-free spot rate increased to 2.3% as of the end of Q1 2022 and lies significantly above the 1.7%, observed as of the same date last year. However, the five-year historical average still lies below the values of the previous four quarters. 

In times of economic turbulence, we deem monitoring the developments of the most recent market data to be crucial to understand their impact on the key parameters used in corporate valuations. In our quarterly publication Valuation – Market Essentials Switzerland we present the key highlights of the most recent market developments. The publication covers market multiples and cost of capital components per sector for the companies of the Swiss All Share Index (except general financial and real estate companies) as well as relevant macro-economic data used in business valuations.

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Sector abbreviations:

R&CP – Retail and consumer products

E&U – Energy and utilities

IG&S – Industrial goods and services

MT&T – Media, technology and telecommunication

CC&M – Chemicals, construction and materials

  • Trading multiples Switzerland

    In Q1 2022 the median trading EBITDA multiples of the six sectors showed the following development.

    The underlying EBITDA figures for Q1 2022 and Q4 2021 for individual companies across all sectors are based on the same financials either as of December 2021 (76% of companies) or as of September 2021 (6% of companies). Therefore, the downward development of the multiples is mainly driven by the development of market capitalization of the major part of the underlying companies. To gain further insights into the development of trading EBITDA and EBIT multiples per sector and subsector during the last 5 quarters, explore our Dynamic Dashboard by clicking on the link given above.

  • Transactions Europe

    Total number of deals in Q1 2022 vs Q4 2021

    165

    During Q1 2022, the number of deals in the European M&A activity declined by 25% from 220 to 165.

    Total number of deals in Q1 2022 vs Q1 2021

    -26%

    In Q1 2022, the market observed 26% fewer transactions than in the same quarter last year.

    *The total number of deals means M&A deals, which were announced or announced & closed and have published at least one of the Revenue, EBITDA, or EBIT multiples.

    The overall decline in the number of transactions was driven by all sectors except IG&S. The five sectors experienced a decline in the number of transactions between 20% and 56%, with the strongest decline of 56% in the CC&M sector.

    R&CP: After an increase to 55 transactions in Q4 2021, the M&A activity declined to 31 transactions in Q1 2022.

    E&U: The number of transactions declined over the past two quarters from 9 to 4 transactions as of Q1 2022.

    Healthcare: After an increase to 27 transactions in Q4 2021, the M&A activity declined to 15 transactions in Q1 2022.

    IG&S: After a sharp slowdown to 48 transactions in Q4 2021, the M&A activity increased to 55 transactions in Q1 2022.

    MT&T: The number of transactions continued its declining trend from 78 transactions in Q2 2021 to 53 transactions in Q1 2022.

    CC&M: The number of transactions declined significantly from 16 transactions in Q4 2021 to 7 transactions in Q1 2022.

    Average deal volume in Q1 2022

    $ 234m

    A decline of 41% in the average deal volume (total deals value / number of deals) was observed in all sectors except I&GS as of Q1 2022.

    Top Country

    UK

    Since the last four quarters, UK has retained the top spot among countries in terms of number of deals and location of the target company. In Q1 2022 the number of deals in the UK contributed 30% of total transactions, followed by Sweden (16%) and Germany and Norway (each at 7%).

  • Unlevered beta

  • Debt to total capital ratio

    Given that for Q4 2021 and Q1 2022 the debt figures for the companies are based on financials as of December 2021 (76% of companies) and as of September 2021 (6% of companies), the change in the debt to total capital ratio is primarily driven by the development of market capitalization of the companies. Based on the same financials as of December 2021 (for a major part of the companies), the median debt to total capital ratios increased since Q4 2021 for the four sectors: E&U, MT&T, CC&M and IG&S. For R&CP the median ratio declined in Q1 2022, while for Healthcare the ratio did not change significantly.

    To drill down through the debt to total capital ratios on a sector-by-sector basis during the last 5 quarters visit our Dynamic Dashboard by clicking on the link given above. 

    Assets

  • Banking and Insurance Sector

    P/TB multiple

    Assets

Summary

Our Valuation, Modeling & Economics Team is here to support you with Valuations, Liquidity & Scenario Planning, Portfolio Analysis, as well as other services to help you navigate through your action plans!

Acknowledgements

We thank Elizaveta Leontyeva, Besa Alusi and Michael Keck for their valuable contributions to this article. 

About this article

Hannes Schobinger
By Hannes Schobinger

Partner, Leader Valuation, Modeling & Economics | EY Switzerland

Passionate about corporate finance.

Contributors

Marc Filleux

Related topics Strategy and Transactions
Upvote