Company acquisitions and sales by SMEs break all records
Despite the Covid-19 pandemic, M&A activities by SMEs have recovered: company acquisitions and sales by SMEs are at a record-breaking level, according to the auditing firm Deloitte.
Cheap money makes company acquisitions and sales by SMEs attractive. Accordingly, M&A activity has recovered impressively despite an environment still dominated by the Covid 19 pandemic, according to the latest Deloitte MidCap M&A Study. Since it was first published in 2013, never before have so many transactions taken place as in 2021, according to the report. Globally, the value of company acquisitions and disposals rose to 5.8 trillion US dollars in 2021, clearly eclipsing even the previous record year of 2007 (4.55 trillion US dollars). Compared to 2020, this development corresponds to an increase of 64 percent, and the number of transactions increased by 24 percent. M&A performance for Switzerland saw similar growth to 233 transactions (+24.6%). Private equity investors also showed greater confidence in the market again and were involved in a total of 94 transactions. According to Deloitte, this is more than a doubling and also a record figure.
Swiss SMEs see opportunities abroad again
60 Swiss SMEs made an acquisition abroad in the past calendar year (+30.4%). Confidence in opportunities outside Switzerland's borders is thus at a historically high level. Almost half of the acquisitions took place in the immediate neighboring countries, with Germany remaining the preferred target country with 30 percent of the transactions. Swiss SMEs were most interested in the TMT (technology, media and telecommunications) and healthcare sectors. Both sectors have been instrumental in coping with the ongoing digitalization during the global pandemic last year. By contrast, the manufacturing industry, which dominated the rankings in the past, dropped to fifth place in 2021.
In contrast, a total of 173 Swiss SMEs were acquired. The number of domestic buyers rose moderately to 76 (+10.1%), while inbound transactions increased by over a third to 97 deals. "The surge in cross-border transactions confirms the general regained confidence in the international macroeconomic situation. The easing of uncertainty around COVID-19 has also certainly further supported this development," explains Anthony West, Head Corporate Finance at Deloitte Switzerland.
Swiss SMEs show resilience and remain attractive
Just under three quarters of the foreign buyers are European companies. More than a third of these (36%) come from neighboring countries, with Germany the largest investor in Switzerland at 26 percent. Also on the podium are the U.S. and the U.K., which were the buyers in 18 percent of acquisitions each. Transactions were again mainly made in German-speaking Switzerland, and the canton of Zurich remains the most dynamic region with 55 deals.
"Swiss SMEs have demonstrated resilience, global leadership and unwavering innovative strength during the pandemic. This makes them attractive to foreign investors today and will continue to do so in the future. In addition, we have observed an increase in local transactions since the beginning of the pandemic. So the stable political and regulatory environment remains attractive," says Anthony West.
Economic growth likely to further boost boom for company acquisitions and sales
After the turbulent 2020, 2021 will go down in history as a peak year both globally and from a Swiss perspective. It is unlikely that this growth trend in corporate acquisitions and disposals will slow down in 2022. The abundance of capital, the current favorable financing opportunities and the high company valuations should continue to boost the M&A market. The TMT and healthcare industries will also be in focus in 2022 as they continue to ride the wave of digitization and innovation triggered by the pandemic.
However, the global rise in infection rates from the Omikron variant of the virus highlights the fragility of the global recovery. "We also see potential impediments to current growth," said Anthony West. "These include potential travel restrictions, shutdowns and the risk of inflation, as well as geopolitical risks in certain parts of the world."
Source: Deloitte
