The smoke is gone – M&A after the CHF appreciation

Buy now, to create competitive advantage in times of rapid change The shock of the latest decision of the SNB to no longer defend the floor of 1.20 for the CHF to the Euro is not yet gone, but quickly the smoke vanishes. For now, it is important to quickly assess the situation, analyse the impact for the own business and start to adapt to the new reality. This can be the best moment for M&A transactions, also for firms, rather careful in the past. Who is effected by the new exchange rate? – In fact, really all of us! Obviously, the new exchange rate is a challenge for firms, exporting from Switzerland. However, there is no reason, to lean back for the management of firms, with a focus on the national market. They are also in danger to lose business, as the threat of substitutions through imports is significantly increased. This is an obvious risk for B2B industries, but also consumer industries are affected by this threat. 80% of the Swiss population are able to travel to the Euro-zone in less than one hour. Merchants in the border regions are gearing up and are ready to welcome Swiss consumers. Following industries need to act:
  • B2B industries, exporting any kind of goods
  • B2B industries, providing any kind of goods to the national market
  • B2C retail companies
  • Service industries of either of those
Service industries are excluded? – Surely not! Any form of tangible goods is easy to immediately substitute by imports. Nevertheless it is likely that consumers as well as businesses will consider, to purchase services in the future in the Euro-zone. Examples may include, but not be limited to:
  • Saving money by getting e.g. a haircut across the border for consumers
  • Purchasing e.g. maintenance for equipment and machinery, or
  • conducting R&D or other services in the border areas for businesses
Following the industry’s value chain, also firms, with an exclusive focus on the Swiss market, as e.g. payment providers, data centres, professional service firms etc. will suffer from shrinking revenues of their business customers. How to react? – If you can’t fight, become allies! In the past off- / near shoring has been a strategic option mainly for bigger firms. Recently it has become an easy accessible option for SME companies also. Some of those will need to examine closely as a matter of survival. With effecting the Swiss SMEs, the new situation is systematic. Except for the big multinationals, which are highly diversified and independent from national markets, and those firms, holding private knowledge (e.g. IP/patents for desired goods) any other firm will have to deal with the situation. For those others, strategic pricing is a key driver for competitiveness. Cutting on costs will be a top priority for many in the near future:
  • Eliminating excess capacities, and increasing efficiency and productivity, but also
  • Outsourcing parts of the value chain to the Eurozone, to benefit from arbitrage will help, to adapt to the new market situation.
The situation is to stay, hence, executives need to look for sustain solutions, eligible to last long. Be fast; time is scarce – prices will rise again! The prices of possible acquisition targets in the Eurozone also dropped by roughly 20%, it is also the right time to enter into M&A.
  • Once, strategies will be in place, the number of buyers on the market will increase – hence, prices for attractive targets will rise.
  • Once, consumers (and firms) will have shifted in their purchasing behaviour, interesting target firms in the Eurozone will benefit here from and cash flows will improve – hence, prices will rise.
For those companies, with a keen eye on the market and a ready list of possible targets, now might be the moment to move to due diligence and execution. This can be the right time, to complete an attractive portfolio at an attractive price and also the moment, to create a competitive advantage, which also helps to foster the competitive proposition in the mid-term future.

Coming up:

Will Lego be victim to disruption? – what the board can do about it. 

Register to receive updates


2 thoughts on “The smoke is gone – M&A after the CHF appreciation

Add yours

Leave a Reply

Your email address will not be published. Required fields are marked *

Proudly powered by WordPress | Theme: Baskerville 2 by Anders Noren.

Up ↑