Another sharp decline in mergers with Swiss SMEs

In 2024, Swiss SMEs carried out significantly fewer transactions than in the previous year. Between January and December, there were a total of 179 transactions (2023: 196 transactions), which corresponds to a decrease of 8.7%. These are the findings of the latest study on the M&A activities of Swiss SMEs by the auditing and consulting firm Deloitte. The main negative driver was domestic transactions - i.e. those activities in which Swiss SMEs acquire another company within Switzerland. These fell by almost a third to 48 transactions (-28.4% vs. 2023). This is the lowest level in six years.

All sectors were affected by the sharp decline in purely domestic transactions. The main reason for this is the prioritization of growth outside Switzerland through acquisitions. Swiss SMEs want to gain increased access to new markets and more cost-effective resources. In addition, the challenges for financing transactions have increased due to greater concentration in the Swiss banking sector. The tense economic situation in Germany is also likely to have dampened Swiss SMEs' appetite for acquisitions.

There was a trend reversal in 2024 for transactions in which Swiss SMEs acted as buyers from foreign companies (outbound). This figure has risen steadily since 2020, peaking at 69 transactions in 2023 and then stagnating at 68 transactions last year. With 82% of all transactions in 2024, Swiss SMEs mainly invested in European companies. What is exciting here is the trend away from the large, geographically closest trading partners Germany and France towards investments in more distant and smaller, but faster-growing markets that tend to have lower costs, such as Poland and Spain.

Takeovers in the IT sector are losing weight

There was a marginal increase in inbound transactions, i.e. transactions in which Swiss SMEs became the target of mergers by foreign companies. In 2024, 63 inbound transactions were carried out (vs. 60 in 2023). The majority of all M&A activities (85%) are attributable to companies from German-speaking Switzerland.

European investors are particularly interested in Swiss SMEs: they are responsible for almost three quarters (73%) of all acquisitions. The most important European investors come from Germany, France and the UK; in 2024, more transactions were carried out in all of these countries compared to the previous year. The largest non-European investors are based in the USA. In Switzerland, industrial companies were the main target of foreign takeovers (20%). Meanwhile, the proportion of takeovers of IT and software companies fell sharply (2024: 14% vs. 2023: 20%).

A cautiously positive outlook

After a poor transaction year in 2023, the global M&A market recovered slightly in 2024 (USA +2.8%, Europe +12%), as the year-on-year figures from financial market news agency Mergermarket show. Switzerland thus clearly lagged behind international developments. "Stricter regulations in the USA, the UK and other countries have also slowed down transactions with Swiss participation - particularly in innovative sectors and strategic goods. This has resulted in a considerable backlog, which is likely to clear somewhat in 2025 with the completion of many postponed deals," explains Kristina Faddoul, Head of Strategy, Risk & Transactions Advisory at Deloitte Switzerland.

The current economic situation should encourage more transactions. According to figures from the State Secretariat for Economic Affairs (Seco), economic growth in Switzerland is expected to accelerate moderately to 1.6% in the current year. Falling key interest rates are also likely to further stimulate the M&A market and create a more attractive financing environment. The strength of the Swiss franc and the resilience of the Swiss economy compared to neighboring countries underpin this positive outlook.

Uncertainty and geopolitical uncertainties

Kristina Faddoul comments: "In January of the current year, there was already increased activity in mergers and acquisitions in Switzerland. This makes us fundamentally optimistic for 2025 and we expect M&A activity among Swiss SMEs to increase again, bringing more momentum to the market. If we look beyond our borders, however, we see that numerous economic and geopolitical factors are causing uncertainty and instability in the international environment. The situation is very volatile, which is also reflected in the global transaction figures for January, which fell by 49% compared to the previous year. It is therefore difficult to make a meaningful forecast for 2025."

Source: www.deloitte.com