The Swiss economy provided fertile ground for company mergers and acquisitions in 2018, with a record-breaking 493 transactions reported over the course of the year. The transaction volume amounted to USD 132.9 billion. The pharmaceutical industry, consumer goods industry and industrial sector reported particularly high levels of M&A activity. Private equity deals hit a new high, as well, with 160 transactions reported.
Merger and acquisition activity among Swiss companies and investors was extremely high in 2018 and paved the way to a record-breaking year in the M&A business. This is one of the insights revealed by KPMG’s Clarity on M&A study. The number of transactions with Swiss involvement rose by around a quarter (+24.8%) over the previous year to reach 493 deals, the highest number ever recorded since these statistics were first compiled in 2007. While the transaction volume also increased substantially over 2017, from USD 101.5 billion to USD 132.9 billion (+30.9%), it still fell short of the USD 188.1 billion record set in 2014.
The pharmaceutical and life sciences industry, consumer goods industry and industrial sector reported particularly high levels of M&A activity. While the largest number of transactions took place in the industrial sector (88 deals), the transaction volume was highest in the pharmaceutical and life sciences industry where deals totaled nearly USD 29.5 billion. The technology, media and telecom sector (68 deals) and financial sector (62 deals) were also extremely active. Nevertheless, the total transaction volume of USD 15.7 billion generated in these two economic sectors was still considerably lower.
“Swiss corporations like ABB, Novartis, Nestlé and Glencore reached further milestones in their transformation journeys and conducted meaningful transactions, which helped them to either make substantial progress in their portfolio restructuring projects or complete these projects altogether,” explains Timo Knak, Head M&A at KPMG.
The largest transaction volume by far was generated in the deal between Novartis and Britain’s pharmaceutical giant GlaxoSmithKline (GSK): Novartis sold its 36.5% stake in a mutual joint venture to GSK for USD 13.0 billion to focus further on developing and growing the group’s core business. The Basel-based biotechnology and pharmaceutical company then acquired two US firms, AveXis Inc. (gene therapy) and Endocyte (cancer therapy), for a total of USD 10.6 billion.
ABB will sell its Power Grids division to Hitachi, the Japanese industrial group, for USD 9.4 billion. Swiss food group Nestlé acquired both the production capacities as well as the trademark and distribution rights to consumer and restaurant products from the US-based retailer Starbucks for USD 7.2 billion. Glencore sold its stake in Russia’s Rosneft oil company to Qatar’s sovereign wealth fund Qatar Investment Authority (QIA) for USD 9.3 billion.
Private equity is playing an increasingly important role in company mergers and acquisitions. Private equity deals peaked at 160 transactions in 2018, the highest number ever recorded since these statistics were first compiled in 2007. While 2017 had already brought a substantial increase of 32.2% in the number of private equity transactions over 2016, the transaction volume expanded to USD 35.6 billion in 2018, which is 96.7% higher than in the previous year.
The growing influence of private equity is underpinned by a persistently low interest rate environment with correspondingly cheap financing terms, widespread economic growth and successful fundraising. “Against this backdrop, players are getting creative in an oversaturated market. The importance of sector-based diversification and cross-border expansion is on the rise because private investors continue to look for attractive assets,” explains Timo Knak.