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Chinese investments Swiss mergers and acquisitions thrived in 2016

ChemChina's $43.3 billion takeover of Basel-based Syngenta last year was China's greatest-ever operation abroad.

(Keystone)

Last year, Switzerland saw its highest volume of mergers and acquisitions since 2007, with investments by Chinese companies playing a leading role. 

The year 2016 was notable for its uptick in mergers and acquisitions worldwide, and Switzerland was no exception, with the number of transactions growing by 3.4% over the previous year to 362. This increase is due in no small part to several takeovers by Chinese companies, according to a report by international auditing consultancy KPMGexternal link, released on Tuesday.

The report reveals that last year, Switzerland’s total volume of merger and acquisition transactions grew by 40% to $119.1 billion (CHF119.4 billion) – the highest the nation has seen since 2007.

Chinese investments were particularly strong, notably with the proposed takeover of Basel agrochemical giant Syngenta by the China National Chemical Corporation (ChemChina). Worth $43.3 billion, the offer has been heralded as China’s greatest-ever operation abroad. It is still awaiting regulatory approval.

Other major transactions involving Chinese funds included the acquisition of Gategroup Holding AG and SR Technics by HNA Aviation Group. Both the ChemChina and Gategroup transactions made the list of Switzerland’s top ten mergers and acquisitions of 2016.

Portfolio diversification, pursuit of advanced technology, and a desire to own traditional companies with "Swissness" can explain the Chinese interest in Swiss businesses, according to KPMG.

Attractive USA

For their part, Swiss firms were more interested in American companies. The acquisition of Relypsa by Galenica for $1.5 billion was accompanied by several small transactions, confirming that the US is an attractive market for the Swiss, KPMG said in its press release.

For banks, transactions were less numerous. The most important was the acquisition of the Banca della Svizzera Italiana (BSI) by EFG. The merged bank is now one of the five biggest asset managers in Switzerland.

Global uncertainty

The auditing firm noted that political events like Brexit and the American presidential election undermined the global mergers and acquisitions market last year. These factors have had – and continue to have – an impact on Swiss companies. The Swiss economy is nevertheless “very well placed”, and Swiss groups remain very active on the market despite the strong franc, the consultancy said.

KPMG predicts a rebound in activity in the financial sector in the coming year, with much potential seen for consolidation among private Swiss banks. But in the realms of insurance and asset management, only small or average-sized transactions are expected.

Patrik Kerler, Head of Mergers and Acquisitions at KPMG Switzerland, recommended in the report that Switzerland “focus on its competitive advantages such as innovation, a highly skilled workforce, political stability and global relationships…In terms of maintaining the latter, the adoption of corporate tax reforms will be a litmus test.” He noted that: “The development of limits on immigration into Switzerland will also be a key determinant of Swiss businesses’ future ability to access global talent."

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