Chinese offensive in a lively M&A year

Media Release: Chinese offensive in a lively M&A year

Despite some uncertainty on both the political and economic stages, 2016 developed into a strong year for M&As, particularly as a result of a remarkable flurry of activity during the fourth quarter of the year: The number of Swiss transactions saw a slight year-on-year rise of 3.4%. The transaction volume grew by USD 34.1 billion or 40% over the previous year. The past year also featured several relevant deals in Switzerland with Chinese involvement and all signs point to another lively year on the M&A market in 2017.

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The number of mergers and acquisitions grew yet again in 2016, both in Switzerland and around the globe. In fact, the 2016 M&A year boasted the second-highest volume in Switzerland since 2007 and the third-highest globally, also since 2007. The number of transactions with Swiss involvement rose by 3.4% over the previous year, namely from 350 to 362 deals. The transaction volume, on the other hand, soared by more than 40% from USD 84.9 billion in 2015 to USD 119.1 billion in 2016.

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Some uncertainty could be felt on the global M&A market which was triggered by major political events including Brexit and the US presidential election. These factors also had an impact on Swiss businesses which has not yet dissipated. Nevertheless, the Swiss economy is still in an extremely good position overall, even despite the strong franc, and the country’s market players are highly active in the international M&A market.

Upturn in Chinese investments in Switzerland

The 2016 M&A year yielded some remarkable deals such as the announced acquisition of Syngenta by China National Chemical Corporation – a landmark transaction that speaks to China’s growing confidence in undertaking foreign acquisitions. Coming in at a value of USD 43.3 billion, China National Chemical Corporation’s acquisition of Syngenta marks the largest-ever outbound deal by a Chinese company. Other prominent deals with Chinese involvement include the acquisitions of Gategroup and SR Technics by the HNA Aviation Group.

While China dominated in terms of acquisition volumes in Switzerland, it was mainly the US that appealed to outbound Swiss ambitions. Galenica’s USD 1.5 billion acquisition of Relypsa sat alongside smaller deals to emphasize the continued allure of the North American market for Swiss players on a global growth trajectory.
 

Consolidation in financial sector postponed

Financial sector transactions remained moderate in 2016. Deals in the insurance sector, in particular, came in at the tail end of the M&A rankings since major consolidation moves were postponed by at least a year. Of the few transactions conducted in Switzerland’s financial center, one noteworthy deal was the acquisition of Banca della Svizzera Italiana (BSI) by EFG Bank which propelled the post-merger bank to a top-five position among Switzerland’s largest wealth managers.

M&A activities in the financial industry are expected to pick up again in 2017. Significant potential remains for consolidation in private banking, while insurance and investment management players are only expected to conduct smaller and mid-sized deals.
 

Technology, cash reserves and portfolio optimization as drivers

An important, sustainable impetus behind high global M&A activity is the growing dynamic of technical drivers such as digitalization. Another factor is the strong appetite among financial institutions to lend given the high level of availability of financial resources.

Relatively cheap deal financing removes one obstacle to Swiss businesses undertaking the necessary moves to adapt business models and stay ahead of foreign competitors. Patrik Kerler, Head of M&A at KPMG Switzerland, summarizes the current situation on the market by saying: “We already saw some reshaping of business models in 2016 across a number of different industries, which resulted in the divestment of non-core divisions. We can expect to see more of this in 2017. The strong balance sheets and healthy cash reserves of many Swiss groups should further stimulate M&A activity.”
 

Further information

Media Conference - Slides (PDF, in German)

M&A Report

M&A Report

The report provides an overview of the M&A activities in Switzerland.

© 2017 KPMG Holding AG is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved.

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