M&A activity of Swiss SMEs - Record-breaking levels in uncertain times

Although low economic growth of 1.0% is expected for Switzerland in 2023¹, some forecasts predict that economies of industrialised countries will slip into a mild recession. Headwinds such as the threat from inflation and further interest rate hikes could derail transactions both from a seller’s and a buyer’s point of view. Higher interest rates reduce the appetite for M&A activity and are likely to affect valuations. Deal activity will be affected by the global repercussions of the war in Ukraine as well as by high inflation, although the impact of COVID on global public health is lessening. Traction in the M&A market will also depend on interventions by governments and central banks to sustain the economy and capital markets, as well as on geopolitical risks in some other parts of the world, and by the desire of buyers to secure highly sought-after skills that they struggle to recruit in the labour market.

On a positive note, the economic prospects for the beginning of 2023 have improved over the overall sentiment prevailing since the end of 2022. Recent economic data for Europe is better than anticipated, with a lower price of energy and stronger consumer demand. This gives hope for a better-than-anticipated economic performance for the current year and improving economic data could have a favourable impact on the level of M&A activity over the next twelve months.

_{1. Swiss State Secretariat for Economic Affairs (SECO)}