2015 was a troubled year for the M&A market in Switzerland, albeit modest in terms of transactions concluded: While the number of transactions declined 17% year on year, the total value of mergers and acquisitions with Swiss involvement plummeted by a whopping 55% to end the year at USD 84.9 billion. This development is largely attributable to an absence of the large-scale transactions which had made 2014 such an outstanding year for M&A in Switzerland. Given the generally positive environment, however, chances are looking good for a larger number of more significant Swiss M&A activities in the new year.
Although a large amount of money is still available in the market, both internationally and in Switzerland, the number of transactions with Swiss involvement dropped 17% in 2015, namely to 350 from 420 in 2014. The value of those transactions even fell by 55% to USD 84.9 billion. This was mainly attributable to the absence of larger deals which had transformed 2014 into an outstanding M&A year. In 2015, the merger between Chubb and ACE to create one of the world's leading insurance corporations with a traded volume of USD 28.3 billion was the only transaction in the double-digit billion range with Swiss involvement.
Some of the ten largest transactions of 2015 also included the sale of certain assets from the Lafarge / Holcim merger to CRH (USD 7.2 billion) and Dufry's takeover of World Duty Free at a total value of USD 3.9 billion. The announced takeover of Britain's Guardian Financial Services by the Admin Re division of Swiss Re for around USD 2.4 billion represents another major deal with Swiss involvement. Consolidation continued in the banking sector with the acquisition of Coutts International by Swiss private bank Union Bancaire Privée.
At the international level, 2015 was a record year boasting a transaction volume of USD 4,519.3 billion. This development was largely driven by global economic growth, favorable financing conditions and sustained shareholder pressure on management to invest in profitable growth segments. Although the actual number of deals fell short of the previous year, extremely large-scale transactions, such as the mergers of Pfizer and Allergan or Anheuser-Busch Inbrev and SABMiller, propelled the total volume of M&A deals to impressive heights.
The global M&A wave in the international hotel chain sector prompted activities in the tourism industry in 2015. One particularly noteworthy transaction was Mariott International's acquisition of Starwood Hotels & Resorts Worldwide for around USD 12.9 billion to form the world's largest hotel chain. Accor's purchase of FRHI Hotels & Resorts (which also includes the prestigious Fairmont, Raffles and Swissôtel brands) for USD 2.9 billion represents yet another billion-dollar takeover in the hotel industry and gives rise to a global market leader in the luxury segment.
In Switzerland's travel business, Kuoni undertook some notable refocusing measures with two transactions in 2015. One of these was the sale of the company's European tour operating activities to Germany's Rewe Group; both parties to this transaction agreed to keep the purchase price and details of the contract confidential. The other deal concerned the sale of its tour operating activities in India and China for CHF 79 million to Canada's Fairfax Financial, an investment holding firm which also owns the Thomas Cook India travel agency. Also remarkable is the growing number of international investors in the Swiss hotel business. Traditional establishments, such as Waldhaus Flims and Palace Luzern, were among those whose ownership passed to foreign hands in 2015.
Given that the tourism industry is under enormous pressure to change, both internationally and in Switzerland, further restructuring, consolidation and cooperative efforts can be expected in the next few years which should result in an increase in M&A activities in this area.
|Pharmaceuticals & Life Sciences||9%|
|Technology, Media & Telecommunication||19%|
|Power & Utilities||3%|
Now that the initial shock has worn off from the minimum euro exchange rate being scrapped, two different pictures are emerging in Switzerland's corporate landscape. On one hand, some companies are being backed into a defensive position and are fighting to preserve their margins and market position. The sustained strength of the Swiss franc is starting to negatively impact profitability figures, particularly among export-oriented companies. In some cases, reserves are slowly being exhausted and liquidity bottlenecks are looming. This development will also have a vitalizing effect on the M&A market in the current year, namely through sales of companies in dire financial straits. On the other hand, many companies took the opportunity in 2015 to adapt and optimize both their growth strategies and business models. These operations are now ready for future growth through acquisitions in Switzerland and abroad.
Patrik Kerler, Head of M&A at KPMG Switzerland, summarizes the situation as follows, “Against all odds, a great many Swiss companies are still extremely well-positioned. The past year can be viewed as a transitional phase. We anticipate that the coming months will see many businesses gearing up for new strategic transactions and that, in turn, will translate to a further increase in M&A activities in the year to come.”
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