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Economic uncertainty checks small company buyouts

A moped workshop in Switzerland
Swiss SMEs have a greater appetite for foreign buyouts but present a less juicy target for overseas buyers. © Keystone / Christian Beutler

The level of merger and acquisition (M&A) activity among Swiss small and medium sized companies (SMEs) slowed in the first half of the year due to economic and geopolitical challenges.

The ongoing Ukraine war was cited by consultancy firm Deloitte as one reason for subdued activity.

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Rising interest rates have made companies less willing to take on debt to drive expansion while the strong franc made Swiss firms a less attractive proposition for foreign buyers.

Total M&A activity fell from 133 transactions in the first half of 2022 to 109 in the corresponding time frame this year – a fall of 18%.

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The strength of the franc has changed the tide of takeover transactions, with more Swiss companies taking the plunge abroad than foreign firms splashing cash in Switzerland.

Swiss firms opted mainly for Europe (67%) or the United States (26%) when expanding their businesses through takeovers or mergers.

“Target companies abroad are attractive to Swiss investors due to the strong Swiss franc, while Swiss companies are becoming more expensive for foreign investors,” stated Deloitte on ThursdayExternal link.

Takeovers of Swiss industrial companies particularly declined, with the greatest interest from foreign buyers being shown in the IT and healthcare sectors. The majority of buyers were headquartered in neighbouring countries.

Deloitte believes M&A activity among SMEs will pick up in the second half of the year as the shock waves of banking collapses in Switzerland and the US die down.

A Deloitte survey of SME financial directors found that 59% were more optimistic about conditions for the rest of the year while only 8% feared worsening conditions.

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