Introduction
Currently there is a discussion going on in Switzerland, which shows the sellout of Swiss listed companies as very disadvantageous for Switzerland. Examples such as Kuoni, Clariant, Syngenta and others are cited. In this context it is criticized that after the takeover these companies typically do not become more competitive companies, no better employers and no higher Swiss taxpayers. It is therefore argued that this development is therefore detrimental and harmful to Switzerland. We are not competent to assess this development at the corporate level but have asked ourselves whether this sell-off will also take place in the SME environment in which we mainly operate and whether this is a “curse or blessing for Switzerland”.
Even though we cannot obtain comprehensive statistics, it seems that cross-border transactions in the SME sector on the sell side have been steadily increasing over the last 25 years and therefore more and more SMEs are being sold to foreigners. The statistics of our almost 30 years of M&A practice show that over 50% of sell mandates, especially succession arrangements, are now sold to foreigners.
Is this sell-out of SMEs abroad a “curse or blessing for Switzerland?
Reasons Why Foreign Investors Want to Buy Swiss SMEs
Switzerland continues to be one of the most competitive business and economic areas in the world. The arguments why foreigners continue to regard Switzerland as an attractive environment are well known:
• Stable political and economic conditions
• Liberal labor market
• Stable currency, hedge for foreign weakening currencies
• Attractive tax system
• High level of education and a strong education system
• Intensive R&D / Innovation activities
• Significant Life Science / ICT / Fintech, etc. hubs
• Multilingual marketplace
• Leading test market for Europe
All these are good reasons why an entrepreneurial investment in Switzerland makes sense for foreigners and is attractive. Some time ago, Switzerland also gained additional weight as an interesting “intermediary” and trading platform in connection with the customs discussions.
Reasons Why Swiss Investors Want to Buy Swiss SMEs
Of course, there are also good reasons why domestic transactions take place here, but they seem to have less a strategic than an operational background:
• Acquisition of market shares
• Market adjustments/shakeouts
• Cost optimization by exploiting synergies
• Purchase of innovations / new business models (e.g. digitization)
• Safeguarding jobs in Switzerland
For strategic reasons, within the framework of growth strategies or the optimization of the existing value chain, M&A strategies tend to lead Swiss SMEs into foreign markets instead of the home market.
For Swiss SMEs, the attractive arguments for foreigners are also a competitive advantage, which they prefer to exploit abroad.
Conclusions
It is not surprising that the number of cross-border transactions among SMEs is increasing. On the one hand, Swiss SMEs tend to seek target companies abroad within the framework of growth and M&A strategies, and on the other hand, foreigners try to exploit the advantages of Switzerland described above through acquisitions.
If Swiss SMEs are up for sale, offers are typically obtained from Swiss and foreign buyers. If we receive Swiss offers at all, we notice that the foreign offers are often more attractive and practically always ensure that the existing locations, jobs and infrastructures are maintained in the long term.
We expect this trend to continue. In our view, this will not be to the detriment of Switzerland.
Since these transactions by these foreigners are very deliberate and often of a strategic nature, we assume that the investments in Switzerland will be sustainable for the benefit of SMEs, employees and ultimately the tax authorities. The added value remains in the country even if the property is possibly held abroad – from this point of view this is a blessing.
Nobody, as in the aforementioned corporate discussion, can prove that these Swiss SMEs held by foreigners had a more prosperous future under Swiss ownership than under foreign ownership.