IFBC Market Report 2023

Uncertain markets pose increasing risks for companies and offer opportunities for players with financial room for maneuver

Uncertain times are a challenge for financial management. The war in Ukraine has brought great human suffering and has had global economic and political consequences. Global uncertainty and the rise in interest rates have impacted the development of the stock markets, and historically high inflation rates are forcing central banks to pursue a restrictive monetary policy. In Switzerland, further interest rate increases in spring 2023 have already been announced.

Real GDP growth rate Switzerland

Inflation Switzerland

With regard to real GDP in Switzerland, Europe and the USA, an economic slowdown is expected for 2023. According to the forecast, inflation rates are expected to decrease in the course of the current year 2023 only slowly.

In a tense market environment, a thoughtful financial management with regard to M&A, valuations and financing is a competitive advantage.

M&A:

• For strategic investors with financial room for action, there are increased opportunities to be successful in acquisitions of attractive targets.
• The interaction of commercial and financial due diligence is gaining importance: Transaction risks must be contractually hedged or taken into account in the valuation by means of discounts.
• On the seller side, the reduced valuation level must be countered with a sharpened positioning of the business model.
• The M&A environment is currently challenging for private equity companies, as it has become even more difficult to achieve the targeted returns.

Valuation:

• There is a key link between sustainable valuation levels and the assessment of the economic and geopolitical situation.
• In a volatile and complex market environment, the requirements for stringent valuation are increasing. Challenges in cash flow planning and cost of capital determination must be met with scenarios.
• Valuation levels tend to fall and increase impairment risk.
• Lower valuations and returns in the portfolio of private equity companies increase their pressure to act.

Financing:

• The general rise in interest rates as well as the accentuated uncertainties, which are causing credit spreads to widen, are making financing more expensive.
• Industrial companies are under particular pressure due to their high exposure to sales, resource and currency risks and their often below-average creditworthiness.
• Measures to create financial room for action must be implemented with foresight. Dependencies on financing need to be reduced.
• In the current environment, communicating a sustainable debt story is once again becoming increasingly important.

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IFBC Market Report 2023 (publication in German)

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