Mergers / acquisitions: sharply down due to corona

According to the latest M&A study by KPMG, the mergers and acquisitions business cooled off in 2020 compared with the previous year. The number of transactions with Swiss participation fell from 402 to 363; at USD 63.1 bn, the transaction volume was only half as large as in the previous year (USD 127 bn). The decline in transaction volume can be attributed primarily to the absence of mega-deals last year. Nevertheless, M&A remains an important pillar of some corporate strategies. This is the finding of KPMG's annual "Clarity on M&A" study.

Corona crisis slows down transactions

In the second quarter in particular - under the influence of the outbreak of the corona pandemic - the market for mergers and acquisitions suffered a sharp slump. Only 74 transactions were completed, the lowest number since the beginning of 2017. At the same time, the transaction volume of only USD 7.1 bn was the lowest quarterly figure since the end of 2015.

A major reason for the lower M&A activity last year was, in particular, the major uncertainties and constraints caused by the outbreak of the corona pandemic. As such, the focus of many companies in the first half of 2020 was primarily on overcoming the challenges posed by the corona crisis on a global scale. "Given the pressing challenges faced by companies, some transactions already in progress were put on hold. Travel restrictions and the move to home offices also delayed transactions," said Timo Knak, head of mergers and acquisitions at KPMG. Some companies had also questioned or postponed planned deals due to the uncertainties prevailing in the market.

Digitization leads to great dynamics in the technology sector

The ten largest transactions accounted for around two-thirds of the total transaction volume in 2020, driven primarily by the TMT sector (technology, media and telecommunications). In fact, in 2020, this industry accounted for more than one-fifth of all transactions (80 out of 363) and more than one-third of transaction volume (USD 22.1 billion out of USD 63.1 billion). "The figures clearly indicate that the acceleration of digitalisation in the wake of the Corona crisis has had a direct impact on the mergers and acquisitions business," says Knak.

Two transactions from the TMT sector are particularly noteworthy and were also the largest deals of the past year: on the one hand, the purchase of Sunrise by UPC, a subsidiary of Liberty Global, with a deal volume of almost USD 7.2 billion and, on the other hand, the merger of CPA Global, a portfolio company of Partners Group, with the US-based Clarivate Analytics with a transaction value of USD 7.1 billion.

Little M&A activity in the life sciences and pharma sector

The life sciences and pharmaceuticals sectors, which had been the driving force behind the Swiss M&A market in 2019, played a subordinate role in 2020. While these sectors still recorded 65 deals in 2019, the figure for 2020 was 42. The transaction volume shrank by a factor of ten year-on-year from USD 65.2 billion to USD 6.2 billion. The decline in the transaction volume can be explained primarily by the fact that no mega-deals, which are often seen in the pharmaceutical industry, were recorded last year.

Swiss companies on a shopping spree

Swiss companies again acquired significantly more foreign companies than the other way around last year: in 154 cases (42 percent of transactions), foreign companies were acquired by Swiss companies and in 84 cases (23 percent of transactions), Swiss companies were acquired by foreign companies. National transactions (Swiss/Swiss) increased proportionally compared to the previous year and accounted for a fifth of all transactions with 74 deals (2019: 16 percent). In contrast, the number of foreign transactions with Swiss sellers declined slightly; with 51 transactions (previous year: 59), around 14 percent of all transactions fall into this category.

Outlook: moderate development

Despite the continuing uncertainty in the market - not least due to newly emerging mutations of the coronavirus - Knak expects a moderate development in the M&A market: "Companies seem to have adjusted well to the new circumstances. This is shown, among other things, by the relatively rapid recovery of the transaction market from summer 2020. In addition, mergers and acquisitions remain strategically important topics. Hopes are ultimately based on the fact that with the vaccination campaign underway, the virus can be contained and the uncertainties in the market will diminish accordingly."

The M&A expert also expects growing momentum to set in, especially in the area of e-commerce. At the same time, new technologies are available that can support M&A activities. Thanks to improved computing power and greater storage capacities, transactions can be planned increasingly effectively and processed more efficiently. As a result, decision-making processes are becoming more robust and transparent. At the same time, completely new opportunities for client interaction are opening up.

Press release KPMG