New high for Swiss M&A deals

In 2018, Swiss companies and investors were extremely active in mergers and acquisitions, resulting in a record year for M&A deals. This is shown by KPMG's "Clarity on M&A" study. The number of transactions with Swiss participation increased by around a quarter compared to the previous year (+24.8%) and, at 493 deals, reached the highest level since the survey began in 2007. The transaction volume also increased markedly compared to 2017, from USD 101.5 billion to USD 132.9 billion (+30.9%), but fell short of the record figure of USD 188.1 billion set in 2014.

Particularly large number of M&A deals in pharmaceuticals and life sciences

M&A activity was particularly high in the pharmaceuticals and life sciences sectors, the consumer goods industry and the industrial sector. With 88 deals, the latter sector recorded the most transactions. However, at just under USD 29.5 billion, pharmaceutical and life sciences companies achieved the highest transaction volume. The technology, telecommunications and media sectors (68 deals) and the financial sector (62 deals) were also very active. However, the transaction volume of both sectors totaling USD 15.7 billion was at a significantly lower level.

Consistent implementation of the transformations

"Swiss companies such as ABB, Novartis, Nestlé and Glencore were able to take further steps on their transformation paths and significantly advance or complete the reshuffling of their portfolios with significant transactions," explains Timo Knak, Head of M&A at KPMG. The deal between Novartis and the British pharmaceutical group GlaxoSmithKline (GSK) achieved by far the highest transaction volume: In order to be able to continue to focus on the development and growth of its core business, Novartis sold a 36.5% stake in a joint venture to GSK for USD 13.0 billion. Subsequently, the Basel-based biotechnology and pharmaceutical company acquired AveXis Inc. (gene therapies) and Endocyte (cancer therapies) for a total of USD 10.6 billion. ABB will sell its power grid division to Japanese industrial group Hitachi for USD 9.4 billion. Swiss food company Nestlé acquired the production capacity and brand and distribution rights of the consumer and foodservice products of US retailer Starbucks for USD 7.2 billion. Glencore sold its stake in the Russian oil company Rosneft to Qatar's sovereign wealth fund QIA for USD 9.3 billion.

Private equity deals reach all-time high

Private equity is playing an increasingly important role in corporate mergers and acquisitions, according to another finding of the study. The number of private equity deals reached 160 in 2018, the highest level since the survey began in 2007, and 2017 already recorded a striking increase of 32.2% in private equity transactions compared to 2016. The transaction volume in 2018 amounted to USD 35.6 billion, an increase of 96.7% compared to the previous year. The growing influence of private equity is supported by a persistently low interest rate environment with correspondingly favorable financing conditions, extended economic growth, and successfully executed fundraisings. "Against this backdrop, creativity is emerging in an oversaturated market. Diversification by sector or cross-border expansion is becoming increasingly important as private investors continue to look for interesting assets," Timo Knak adds.

Source and further information: KPMG