The annual M&A conference organized by the Finanz und Wirtschaft Forum took place on Thursday, 22 September in the Google conference center, Europaallee Zurich.
Several crisis events in recent years have led to more and more countries decoupling from certain trading partners. Markus Braun opened the conference with his presentation on the megatrends of globalization and digitalization. His findings show that the world is moving towards three major trading blocs around the key countries of the USA, Europe and China. M&A transactions are a crucial strategy tool for nearshoring and making supply chains more resilient. He recommends that smaller and less financially strong local companies in particular should first look at Swiss and European markets before expanding globally in the face of rising market entry hurdles.
As interest rates rise and current geopolitical tensions intensify, companies are becoming more cautious. Valuation multiples of target companies in many sectors have already fallen. Management teams and boards need to think about the needs of their customers and employees and the pace at which the company can evolve. In this way, the strategic fit of an M&A transaction and the successful integration process are becoming increasingly important in a world of higher financing costs. Following an acquisition in the U.S. in the midst of the Corona crisis, the management of chocolatier Läderach visited the landlords and local management of the future Läderach U.S. boutiques to ensure that the integration was on track. SIX Group management remains heavily focused on the post-merger integration of the Spanish exchange. The local management teams know the culture and have a better connection to customers and the overall local market. Swissport International AG takes these cultural differences into account in its M&A transactions, as human capital is becoming increasingly important to remain successful as a company.
Be it in the energy market or in the luxury watch retail market, sustainability becomes a key driver for M&A transactions. As customers require vegan leather watch bracelets, companies such as Watchbox consider this when screening the market for new target companies. Sustainability aspects such as ESG are becoming key elements of M&A transactions. Such requirements bear the risk of greenwashing but also motivate young target companies to comply and hence, increase their value and probability of being acquired.
In short, the key findings of this M&A conference are: The macroeconomic environment with higher barriers to entry, rising interest rates and geopolitical dislocation is making M&A transactions more difficult. Successful deal makers are increasingly focusing on strategy fit and efficient integration of the target company when planning and executing a transaction. The M&A market appears to be shifting from a seller’s to a buyer’s market, with exceptions such as the sustainable energy sector. ESG criteria are becoming increasingly important in the valuation of a transaction.
For more information see also the german text in Finanz und Wirtschaft, 24 September 2022: «Ansprüche an M&A Deals steigen»
Markus Braun, ZHAW SML, Senior Lecturer in International Management
Andreas Bittel, ZHAW SML, Research Assistant at the Institute for Financial Management