Swiss SMEs

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Deloitte 2020 survey on M&A activity in the Swiss SME sector

Reversal of the cyclical uptrend

The long-term cyclical uptrend in M&A activity in the Swiss SME sector reversed in 2019, and the current crisis caused by COVID-19 is set to significantly reduce the volume of transactions in 2020.

M&A activity in Switzerland was mainly driven by SMEs and private equity (PE) funds. However, the total number of transactions was low in 2019 compared to 2018 (-3.4%). In particular, there was a steep decline in domestic transactions (-16%) and a record number of inbound transactions, while the number of outbound transactions stabilised. Owing to the COVID-19 crisis, most Swiss CFOs expect a marked economic slowdown, with a recession in Switzerland, the United States, United Kingdom and the Euro zone.

Given these circumstances, along with the underlying international tensions, M&A activity is set to fall sharply in 2020 .

Deloitte 2020 survey on M&A activity in the Swiss SME sector

Key points of the survey

Outlook

The Federal Government’s Expert Group for economic forecasts expects Switzerland to fall into recession in 2020 with a 1.3% drop in GDP, which it attributes to the COVID-19 outbreak and the temporary halt in activity in certain parts of the economy. Interruptions to supply chains caused by the suspension of production and by distribution problems, restrictions on the movement of people and the direct impact on health are all challenges for 2020. Provided the pandemic situation stabilises, the economy might gradually recover from the second half of the year onwards.

M&A activity in 2020 could suffer from the COVID-19 outbreak and the threat it poses to the global economic outlook. After normalisation of the M&A market in 2019, activity in Switzerland and the rest of the world in 2020 remains subject to the risks of a recession linked to COVID-19. Sales transactions in progress could be temporarily put on hold or postponed to later in the year, given the downturn in performance of companies at the start of this year and the reduction in company valuations, resulting from the free fall in the stock markets. The uncertainty over the timing of the post-COVID-19 recovery – and over its extent and speed – is also likely to weigh on the valuations of companies, whose prospects will be unclear for much of 2020.

About the Deloitte Swiss SMEs Report

The Deloitte report entitled “Deloitte 2020 survey on M&A activity in the Swiss SME sector” examines merger and acquisition transactions involving small and medium-sized enterprises (SMEs). In order to fall within Deloitte’s definition of an SME, companies must fulfil three main criteria: turnover of more than CHF 10 million; fewer than 250 employees and a market capitalisation between CHF 5 million and 500 million. This report covers the period between 1 January and 31 December 2019.

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