China, India and Qatar colonize Switzerland
Whether strategic investments or allocated expenditures, the acquisitions of Swiss companies by large groups or conglomerates from emerging economies have increased in recent years. To support its growth and, in particular, to ensure its great energy needs, China, on the lookout for any good opportunity, is in the lead.
Buying Swiss companies offers Chinese groups quick and relatively easy access to the Swiss market. “It is also a good way to acquire expertise or a recognized brand, which can, in some cases, provide legitimacy in the Swiss, European and even global markets for Chinese companies, which do not always have very good reputations,” says Lawrence Knecht, Head of Swiss Business Hub in Beijing, and responsible for promoting Switzerland as a business base.
The latest example, and a striking one, is the purchase of the Swiss watch brand Corum, which became Chinese at the end of April, just as Baselworld 2013 opened. The China Haidian Group spent Sfr86mn for the company based in Chaux-de-Fonds, employing 140 people. The China Haidian Group had already bought the Swiss brand Eterna in 2011.
There is a risk, of course, that the company will relocate to China or elsewhere. However, acquisition is generally beneficial for the purchased companies, for example, when they are in financial difficulty. The sale allows faster development, thanks in particular to better access to the Chinese market or to the buyer's financial resources.
Another example is the acquisition last year of two factories, Swissmetal Reconvilier (in the Canton of Bern) and Dornach (in the Canton of Solothurn), saved from bankruptcy by the Chinese group, Baoshida. (The factories are expected to retain staff at both sites.) Another example is the industrial group OC Oerlikon’s recent sale of business units to the Chinese group Jinsheng. Jinsheng wanted to optimize its portfolio and the Sfr650mn transaction should be completed in the current year. In this case, too, the Asian group reassured that all jobs would be maintained.
Another example, evocative of the strategic importance of energy to the Chinese, is the acquisition of the Geneva-based Addax Petroleum by the Chinese oil and gas giant, Sinopec. “By buying entire structures established in Switzerland, these groups want, above all, to acquire the skills and use the contacts that these companies have with shipping and surveillance companies long-established in Geneva,” says Daniel Loeffler, director of the Geneva Economic Development Office.
Acquisitions by Indian companies are also increasing. Among the latest is the Zurich consulting firm, Lodestone, bought by the IT services company, Infosys, last year for Sfr.330mn. Buying Lodestone should, among other things, allow Infosys to strengthen its client portfolio and its European presence.
A specialist in the Indian market at Switzerland Global Enterprise (Osec), Beat Ineichen believes that, in general for this type of purchase, the conditions for employees are maintained, with the new owner seeking to provide comparable conditions. Senior management is generally comprised of a team from India, but, over time, a transfer to more “local management” is common.
Indian companies are also active in the watch industry, including the acquisition in late 2011 of Basle’s Favre-Leuba for two million euros by Titan Industries. But also in construction (Hindustan Construction Company’s acquisition in 2010 of 66% of the Zurich company Karl Steiner for Sfr35mn); in textiles (Prem Durai Exports’ purchase last year of 14% of the Lausanne-based company Switcher); and even in engineering, notably the Avtec Group’s purchase of the Fribourg company, Assag, last year. Finally, the Eureka Forbes Group is currently negotiating to acquire a majority stake in Lux International, a company based in Zug that is active in direct sales of water purifiers.
According to the Consulate General of Switzerland in Mumbai, direct investment by Indian groups in Swiss companies has grown considerably since 2007. This investment is due to different strategies: to access new markets and technologies, to acquire well-established brands, to extend product range, and to diversify risk. These acquisitions are also often linked to issues of succession within SMEs in niche markets.
Here, too, acquisitions take place in a harmonious manner for staff, although relocation to India is always a possibility, especially concerning manufacturing processes. In the future, however, relocation should be increasingly rare, according to the Consulate General, emphasizing the will of Indian groups to leverage the value of “made in Switzerland”.
Qatar likes hotels
For Middle Eastern countries, with oil and money in abundance, interest in Switzerland seems to be focused on luxury companies, especially hotels. In addition to Qatar’s large stake in Credit Suisse (its sovereign wealth fund holds more than 6% of the shares of the bank), the kingdom recently acquired the Hotel Schweizerhof in Bern and the Royal Savoy in Lausanne this year. In 2014, it will be the turn of the Lake Lucerne Burgenstock Resort.