After the first lockdown was lifted in mid-2020, M&A activity began to recover. 2021 went a step further, with the number of deals exceeding pre-pandemic levels to hit record highs. Find out what we anticipate is next for Switzerland's deal market and which sectors and trends to look out for.
Deal markets began to recover strongly in mid-2020 following the lifting of the first lockdown. Deal-makers began to come to terms with market uncertainties and supply chain disruptions, adjusting their M&A plans accordingly. The result was a significant increase in deal activity in 2021 that surpassed even pre-pandemic levels.
Record highs in the number and value of deals
At 604 transactions, deal activity surged ahead in 2021, being more than 20 percent higher than the previous recent peak in 2018 and up 66 percent on 2020. Deal values also rose to their highest point in recent years to reach almost USD 170 billion. Among these figures are some significant deals that are reshaping the Swiss corporate landscape, including Novartis selling back its one-third stake in Roche for more than USD 20 billion and CSL's acquisition of Vifor Pharma for almost USD 12 billion. Even the smallest of last year's top 10 deals came in well above USD 5 billion.
Interestingly, there was a huge increase in Swiss businesses buying abroad. This was the case in every region of the world except the Middle East. Swiss companies spent USD 23.2 billion on acquisitions in North America last year, for instance, almost USD 10 billion in Asia, and a massive USD 29.4 billion in Western Europe, of which almost USD 10 billion was into the UK. The UK was also Europe's largest investor in Switzerland in 2020 and 2021, spending USD 5.5 billion to buy Swiss businesses last year.
Digitalization and sustainability rise to the fore
Taking all deals that involved Swiss businesses – acquisitions abroad, into Switzerland and domestic Swiss transactions, there were three standout sectors in terms of the number of deals. Technology, Media and Telecommunications constituted 17.4 percent of all deals, followed by Industrial Markets at 16.6 percent and Pharmaceuticals and Life Sciences at 14.4 percent.
Technology is an area to watch as companies across industries continue to ramp up their efforts to digitalize and show growing interest in smart sustainable solutions that can leverage technological innovation with environment, social and governance (ESG) considerations.
In fact, we expect ESG to drive significantly more deal activity this year and beyond, as we see ESG rising to the top of board agendas across sectors. Groups in both the commodities and the power and utilities sectors are already turning increasingly to sources of renewable energy, new and upcoming cantonal moves in areas such as climate-neutral heating in real estate, and of course sustainability concerns gaining traction in customers' demands of consumer businesses.
A special focus on innovation in Life Sciences
The pandemic has caused some of this heightened awareness of sustainability topics, and the Life Sciences industry has been at the heart of it and has been much in the news. Over the past couple of years, we have seen agile Life Sciences players accelerate ground-breaking innovation at a breathtaking pace across diagnostics and vaccines in particular. This drive for innovation is spurring a fresh wave of M&A in the sector, fueled by growing interest from existing industry players and the availability of considerable private equity funding.