The increased interest rates have disrupted the sales plans of many business owners.

In an environment of rising interest rates, it is often assumed that enterprise valuation multiples will conversely fall low. As a result, many owners remain unwilling to accept reduced valuations and are thus, delaying the sale of their companies.

However, according to the latest Oaklins M&A Market Outlook, a positive turnaround in sale prices is likely due to expected interest rate cuts in the second half of the year and growing confidence in economic development. As suggested by the study, only 33 percent of respondents consider the availability of external capital to be high or rather high, a slight increase from the historical low recorded earlier this year.

The Oaklins M&A Outlook, published biannually since 2015, reflects insights gathered from approximately one hundred M&A experts and decision-makers in Switzerland.

Private Equity: Catalyst for Change

The index shows the forecast development of M&A activity over the next six to twelve
six to twelve months with the participation of Swiss companies
(survey results in points). (Source: Oaklins M&A Outlook)

A notable aspect influencing M&A dynamics is the role of private equity, the study finds. Despite facing lower valuations and increased financing costs, private equity firms are under pressure to execute transactions.

This pressure is likely to contribute to an uptick in M&A activities particularly through restructuring efforts, spin-offs, and carve-outs in sectors such as Industrials & Chemicals, Pharma, Medtech, Biotech, and TMT.

According to the study, 61 percent of companies plan to make an acquisition in the next 12 months or are seriously considering it, aligning with the long-term average.

Potential Turnaround Ahead

Looking ahead, 29 percent of acquisition-oriented companies remain focused on domestic expansion and bolstering defenses against foreign competitors, with Europe, notably Germany, retaining its strategic importance as a primary target market.

For Jürg Stucker, study author and partner at Oaklins Switzerland, the future for the M&A market is bright: «The more optimistic outlook on inflation, interest rates, and economic development has increased the courage for more ambitious acquisitions in the EMEA region.»

«The average deal value will rise, and large transactions will be carried out more frequently after mostly being absent in 2023,» says Stucker