IFBC M&A Update – Review 2021 & Outlook 2022

Review of an active Swiss M&A year 2021

In the M&A year 2021, significantly more transactions were announced than in the previous year

Following the pandemic-related decline in M&A activities, particularly in the second quarter of 2020, both the observable transaction volume as well as the number of announced transactions in Switzerland rose again significantly in 2021.

Figure 1: Swiss M&A activity 2020–2021

Source: Refinitiv Eikon. Based on M&A transactions with Swiss target companies or Swiss buyers by announcement date (as of January 3, 2022).

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The reasons for this are manifold. Three key factors were:

1. Overall, companies across multiple industries managed to anticipate the uncertainties and challenges of the COVID-19 pandemic better than they did in 2020, and to incorporate the corresponding strategic and financial implications in a targeted way. This paved the way for the execution of deferred transactions.
2. At the same time, companies are increasingly focusing on their core competencies («profit from the core») in an environment that remains challenging, which has resulted in corresponding divestments.
3. Finally, continued favourable financing conditions have further supported M&A activity.

Healthcare, technology and consumer goods in focus

As expected, the intensity of M&A activity varied by industry. Three industry sectors in particular stood out to us in 2021.

The healthcare sector recorded the largest transaction volume by far. This was partly due to the only two public acquisitions of companies listed in Switzerland in 2021. The two announced acquisitions involved two targets from the pharmaceutical sub-sector, Cassiopea and Vifor Pharma. IFBC was mandated as an independent financial advisor to prepare the fairness opinion for the attention of the target company in both transactions.

In addition to pharmaceuticals, healthcare services are currently an important driver of M&A activity in the Swiss healthcare industry. For example, Takeda Pharma AG sold its Swiss home delivery business to a Swiss partner in March 2021 in order to focus on its core competencies of development and production. IFBC acted as financial advisor to Takeda Pharma AG in this transaction.

The largest number of transactions was executed in the technology industry. This industry benefits from the fact that digitization is on the agenda of almost all companies. Along with this, the ability to handle business processes digitally is of paramount importance. In this context, the company SwissSign was purchased by Swiss Post, for example. SwissSign offers innovative solutions in the field of digital identification, certification and signatures. IFBC acted as financial advisor to the sellers in this transaction.

Finally, the consumer goods and services sector recorded both the second-highest number of transactions and the second-highest transaction volume. These were often transactions for consolidation within a specific sub-sector. In this context, OFFIX Holding AG of the Swiss PEG Papeteristen Einkaufsgenossenschaft and the Swiss Office World Holding AG, part of the international MTH Retail Group Holding GmbH, announced in January 2021 that they would bundle their Swiss business in the newly formed Office World Group AG. IFBC acted as financial advisor to OFFIX Holding AG in this transaction.

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Figure 2: M&A activities in 2021 by industry of the target companies

Source: Refinitiv Eikon. Based on M&A transactions with Swiss target companies or Swiss buyers by announcement date (as of January 3, 2022).

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Financial investors also continue to be very active market participants in Switzerland. Private equity investors in particular have very high amounts of accumulated «dry powder» and were keen to deploy this capital last year. They not only focused on targeted add-on acquisitions and investments to expand their portfolios, but also pursued an active exit strategy to realize an increase in value.

Private equity investors focused their buy-side activities in Switzerland in 2021 especially on the technology sector. Around one in three transactions with a Swiss target company involved a transaction in this sector. The focus was particularly on companies from the software and IT consulting & services sectors. Other focus sectors for financial investors on the buy-side were healthcare and financial services. Fintech companies played an important role in the latter. In the healthcare sector, private equity investors focused on biotechnology and medical technology. Overall, it is thus apparent that financial investors also see technological change and cross-sector digitization as particularly important.

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Figure 3: Buy-side M&A activities of private equity investors in 2021 by industry of the target companies

Source: Refinitiv Eikon. Based on M&A transactions with Swiss target companies by announcement date (as of January 3, 2022).

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The Swiss M&A market was again dominated by cross-border transactions in 2021

In transactions involving Swiss target companies, around 55% of buyers were from abroad in 2021. European buyers played the most important role. We felt the interest in Swiss target companies both among our Globalscope partners and in our executed transactions. For example, in November 2021 Deutsche Vermögensberatung AG acquired a majority stake in Global Sana AG. Together, the two companies aim to become the leading provider of bancassurance services in Switzerland. IFBC acted as financial advisor to the shareholders of Global Sana AG in this transaction.

Swiss buyers also focused heavily on European targets. 41% of the Swiss buyers’ target companies were located in Europe. Overall, 63% of the transactions completed by Swiss buyers targeted a company outside of Switzerland.

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Figure 4: M&A activity in 2021 – domicile of buyers and target companies

Source: Refinitiv Eikon. Based on M&A transactions with Swiss target companies or Swiss buyers by announcement date (as of January 3, 2022).

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Outlook on a promising Swiss M&A year in 2022

In 2022, we expect M&A activity to be high once again

Despite the ongoing COVID-19 pandemic, which continues to create economic uncertainty globally as well as industry-specific challenges, we see clear signs of continued high M&A activity. In particular, confidence regarding general economic development and the economic situation (KOF expects real GDP growth of 3.0% to 3.4% in Switzerland, the European Union, as well as the U.S. in 2022) should serve as a key support for high M&A activity. From today’s perspective, this confidence could be dampened somewhat, by continuing global supply bottlenecks, material shortages and rising purchase prices. In general, however, optimism prevails.

Buyers and sellers have M&A actively on their agendas

The strategic focus on the topic of M&A on both the seller and buyer sides is likely based on the following drivers:

Seller-side aspects:

• Many companies have arrived at the «new normal» and can present a solid financial year for 2021. This means that the execution of previously postponed transactions can continue to be expected.
• Due to the ongoing challenges in the current environment, companies continue to come under pressure to strategically focus their activities and resources. Companies are therefore increasingly analysing individual business areas for their profitability and strategic fit and making appropriate divestments.
• Societal trends towards greater environmental awareness and sustainability are increasingly reflected in the M&A activities of both financial investors and corporates. Companies are increasingly divesting businesses that are not environmental or sustainable in order to reduce their exposure to these issues.
• Consolidation in certain sectors is likely to accelerate due to ongoing uncertainties.
• The general valuation level could continue to rise in view of the optimistic economic outlook, which means that sales of companies can still be executed at attractive conditions. However, rising interest rates could change this perspective, which is why attention should be paid to possible interest rate hikes.

Buyer-side aspects:

• Many companies, especially financial investors, still have large amounts of financial resources which they would like to use to make acquisitions.
• Organic growth opportunities remain limited by the ongoing challenges of the COVID-19 pandemic. Companies with sufficient financial resources are therefore likely to continue to seek growth through buy-and-build strategies and make acquisitions accordingly.
• The COVID-19 pandemic has highlighted the vulnerability of global supply chains, so buyers are likely to consider targeted acquisitions to secure their own supply chains.
• Societal trends towards greater environmental awareness and sustainability are also reflected in the acquisition activities of both financial investors and corporates. Thus, targets that advance companies’ environmental and sustainability strategies are increasingly being considered.
• Despite announced adjustments of the monetary policy in the US, the financing environment in Switzerland is likely to remain favourable in 2022 and support the announcement of transactions.
• Technological change is still in full swing and will continue to occupy many companies in 2022. In this context, acquisitions are an option for implementing the digital transformation along with investments.

Also in 2022, certain industry hotspots will be formed

In 2022 as well, the intensity of M&A activity in the individual sectors is likely to show significant differences. Technological change will remain on the agenda of almost all companies in 2022. Technology companies will benefit from this and increasingly focus on expanding their business models into previously traditional industries. Small, innovative technology companies in particular are likely to be acquired by established companies in order to make broad use of their technology or to accelerate technological transformation. Against this background, we expect to see a large number of transactions in the technology sector again this year.

M&A activity is also likely to remain high in the healthcare sector. This expected development is driven by the pressure to innovate and digitize, which has been accelerated by the COVID-19 pandemic, and the changing demands of customers and patients.

The consumer goods and services sector is undergoing a major transformation due to changing customer needs, the need for which has been intensified by the COVID-19 pandemic. This is likely to result in even more pronounced M&A activity in 2022, as companies also seek to align their operations with the new realities through acquisitions and divestments.

With this in mind, we look forward to an exciting M&A year in 2022 and are gladly at your disposal for an exchange of thoughts.

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