{{item.videoDuration}}
{{item.title}}
{{item.text}}
{{item.videoDuration}}
{{item.text}}
Strategic M&A to support growth, innovation and resilience – driven by divestments and transformational transactions – is expected to drive deal activity in the second half of 2024.
In an overall challenging market, companies in the industrials & services (I&S) sectors are calibrating their strategy around portfolio optimisation and the acquisition of technological and green capabilities. Companies are prioritising strategic growth by divesting non-core assets and reallocating resources to more profitable areas. As competition for innovative tech assets increases, dealmakers need to be well prepared. And what about developments in Switzerland?
In the first half of 2024, deal volumes and values in the I&S sectors declined due to challenging macroeconomic and geopolitical conditions. However, we expect M&A activity to recover towards the end of the year, supported by pent-up selling pressure from private equity firms, corporates cleaning up their portfolios, and private companies lacking internal succession. In a subdued economic environment, M&A remains crucial for driving growth and value creation to compensate for low organic growth. Companies are evaluating their portfolios to identify non-core assets for divestiture, aiming to improve capital allocation and reinvest in areas of strategic interest. These reviews often highlight gaps in technology and capabilities, prompting acquisitions in AI, automation, and digital transformation. We also anticipate increased M&A activity driven by industry consolidation, especially among small and medium-sized companies striving to remain relevant amid a sluggish economy and more stringent regulations.
Industrials & services M&A hot spots
There are signs that deal preparation is picking up in industrial manufacturing, aerospace and defence, and engineering and construction, which could be an early indication of an increase in M&A activity towards the end of the year and in 2025. The automotive sector will continue to adapt to the electric future, while business services will undergo further consolidation driven by digitalisation and changing workforce dynamics.
Companies are prioritising investment in cutting-edge technologies, particularly in electric vehicle (EV) battery and charging solutions, the cloud, and automation and robotics, driving M&A activity across all I&S sectors. Supply chain resilience remains an important topic for manufacturing companies, prompting them to reassess global sourcing and consider nearshoring, joint ventures, and partnerships, which may also drive M&A. Sustainability remains a key focus, with firms targeting acquisitions that support ESG goals, decarbonisation, renewable energy, and the electrification and interconnection of industrial equipment to meet stricter regulations and new stakeholder demands.
Notably, artificial intelligence is set to have a major impact on the dealmaking landscape in the industrials sector, as companies look to make acquisitions that enable the integration of AI into the business to offer disruptive solutions, distinguish themselves from the competition, and to open up new revenue streams.
“Speed will be crucial as M&A activity picks up across the industrials and services sectors. Well-prepared dealmakers with a focused list of strategic moves and market-ready divestments will be best positioned for success.”
Michael HuberDirector, Deals Industrials & Services, PwC SwitzerlandGlobal M&A trends in industrials & services
Industrials and services deal volumes and values, 2019-H1'24
Sources: LSEG and PwC analysis
Between the first half of 2023 and 2024, deal volumes and values in industrials and services fell by 28% and 25%, respectively. This global decline was influenced by challenging macroeconomic and geopolitical conditions, with regional variations. Deal volumes dropped 31% in EMEA, 30% in the Americas, and 20% in Asia Pacific, where India, South Korea, Australia, and Japan experienced stronger M&A activity. Deal values, however, increased by 11% in the Americas due to several US megadeals (deals worth more than US$5bn), while EMEA and Asia Pacific saw declines of 27% and 50% respectively.
Sector performance also varied. Aerospace and defense (A&D) M&A activity decreased by 36%, automotive by 32%, and business services by 30%. Deal values fell across all sectors except engineering and construction.
M&A trends in the Swiss industrials & services sector
While early summer offered a silver lining, suggesting that the bottom of the downturn might be in sight, the sharp renewed appreciation of the Swiss franc against both the Euro and the US Dollar, combined with continued weak economic growth in key export markets such as Germany and China, creates a challenging environment for Switzerland’s export-oriented industrial companies. Additionally, uncertainty persists on the political front, with the Bilateral Agreements III — intended to solidify trade relations with the European Union — still under negotiation. The inheritance tax initiative launched by the Young Socialists further complicates matters, threatening the sustainable continuation of family businesses and potentially destabilising a key pillar of the Swiss economy.
Despite challenges and threats on the horizon, Swiss industrial companies have historically proven their ability to weather storms, with M&A being a key tool in their arsenal. One approach involves selling non-core or underperforming assets to free up management resources and reallocate capital to higher-growth areas. We expect this trend to accelerate in the coming months, especially as several larger Swiss companies have already announced in their mid-year reports that they have initiated strategic reviews of certain divisions. On the other hand, we anticipate that strategic buyers with a long-term growth agenda continue to execute their plans, making strategic acquisitions more a matter of 'when' rather than 'if'.
“Faced with the renewed appreciation of the Swiss franc, weak economic growth in key export markets, and various political and geopolitical challenges, Swiss industrial players have consistently demonstrated their ability to weather storms. M&A remains an important tool in their arsenal.”
Michael HuberDirector, Deals Industrials & Services, PwC Switzerland2024 M&A outlook for I&S in the second half of 2024
As companies strive to remain competitive, business transformation and profitable growth are at the forefront of their strategies. Agility, speed, and preparation will be essential for success. We expect deal activity to pick up as the macroeconomic environment stabilises and the election results – and their policy implications – become clearer in the coming months. Overall, addressing the ongoing challenges will drive strategic M&A, which will support growth, innovation, and resilience across the industrials and services sectors.
M&A industry trends in Switzerland
Learn about the key trends driving M&A activity in Switzerland
{{filterContent.facetedTitle}}
{{contentList.dataService.numberHits}} {{contentList.dataService.numberHits == 1 ? 'result' : 'results'}}
{{contentList.loadingText}}
{{contentList.loadingText}}
Contact us
Michael Huber