No fear of foreign takeover rash spreading

Swiss firms are being gobbled up by foreign companies (OKAPIA) Christen/OKAPIA

Market analysts are unconvinced that a recent spate of foreign hostile takeover bids for Swiss companies is a sign of things to come.

Technology firm Unaxis succumbed to Austrian investment group Victory in May while Forbo, Leica Geosystems and Saia-Burgess have been locked in battles to avoid being consumed by foreign bidders.

However, not all the recent foreign takeovers of Swiss concerns were hostile. Earlier this year, national airline Swiss agreed a takeover deal with Lufthansa and Formula One team Sauber also fell into German hands.

A combination of share undervaluation, low interest rates and company specific criteria, such as the geographical market share, have combined to fuel interest from foreign bidders. But experts have dismissed the unusually high number of recent takeover attempts as “coincidental”.

“In the 1990s there were a lot of insurance companies, pension funds and private investors buying equities, but after the stock market crash of 2001-3 investors have become less risk adverse, which has depressed share prices,” Zurich Cantonal Bank analyst Beat Pfiffer told swissinfo.

“Low interest rates also mean that bidders can finance takeovers cheaply. But it is more of a coincidence that there are a lot of hostile takeover bids at the moment. If you look at the activity over a longer period of time it will balance out.”

Going global

Unaxis and Forbo were in poor financial shape making them ripe for takeover bids, but Leica Geosystems and Saia-Burgess were less obvious targets, according to Maria Ivek, an analyst with Credit Suisse First Boston.

“[The tendency towards] takeovers in Switzerland is not a new phenomenon, but it has become more obvious recently,” she said. “The Swiss market is limited, so companies need a global outlook if they are to be successful.

“This makes some Swiss firms attractive as potential acquisitions because they come with a strong product, good management structure and a global sales and distribution network already in place, such as [is the case with] Leica Geosystems.”

Companies can fight a hostile takeover bid by looking for an investor or another company, known as a White Knight, who will offer a better price. They can also buy another firm that does not fit in with the takeover bidder’s strategy, making them a less attractive proposition.

Pfiffer does not believe the Swiss economy as a whole will be adversely affected if the current takeover attempts prove successful, but warns that hostile takeovers expose smaller businesses to other dangers.

“If a really big firm with a large workforce was the subject of such a bid then it could weaken economic consumption in Switzerland as so many people would be worrying about their jobs. But these companies are too small to create such an effect,” he said.

“A hostile takeover from a foreign company does leave Swiss firms exposed to the dangers of asset stripping and job losses as the takeover company could be looking purely at the balance sheet rather than the welfare of the business and its workforce.”

Swiss companies do not appear to be out of the woods just yet, with market speculation linking a number of firms – including Tecan Group, Saurer and Converium – to possible future hostile takeover attempts, according to Pfiffer.

swissinfo, Matthew Allen

Key facts

Unaxis was sold to Austrian investment group Victory in May.
Electrical components firm Saia-Burgess and Leica Geosystems are currently fighting foreign hostile takeover bids.
Forbo rejected a takeover attempt from British venture capital group CVC earlier this year.