Challenging 2015 for Switzerland and Austria

Over the last 12 months, the DACH region has advanced at varying speeds, with legislation and investment opportunities spinning each market in different directions. But one major theme is clear throughout the whole territory – that both buyout and venture deals have experienced major dips.

According to figures from unquote" data taken in early-December, the number of buyouts fell from 374 to 290 compared to last year, while early-stage deals slipped from 284 in 2014 to 211 in 2015.

Germany – waiting for the dip
In terms of deal volume, Germany remained the strongest player, making up for 85% and 86% of venture capital and private equity deals respectively. 

Compared to the other two countries, Germany has reason to remain optimistic, both because of its steady economy and a legislative environment that is increasingly in favour of private investors. In August, the German government decided to allow investors to reclaim taxes paid on capital gains from diversified holdings.

However, German GPs share the same concerns as their counterparts throughout Europe. Burkhard von Wangenheim, partner at Afinum, has a cautious outlook for the year ahead: "I don't think that the overall deal volume will continue to rise, it will probably remain the same as 2015 or decline. Most private equity managers including myself believe that a dip is bound to come within in the next two to three years. The macroeconomic indicators have begun to turn downwards in some areas, but we see no impact on our portfolio businesses so far."

The largest deal in the country saw a consortium of investors led by Allianz Capital Partners, for the acquisition of motorway services operator Autobahn Tank & Rast, which the group bought from Terra Firma. The company had an estimated enterprise value of €3.5bn.

Austria – regulation struggle
The number of buyouts in Austria has almost reached bottom this year, with three deals recorded by unquote" data. However, it is a slight improvement on the two deals completed in 2010. Furthermore, the Austrian Private Equity and Venture Capital Organisation's (AVCO) most recent figures highlight that fundraising activity has also been dismal, witnessing a dramatic fall in recent years. While 2012 saw a solid €173m raised, the combined total fell to €20m in 2013 and just €13m in 2014.

Jürgen Marchart, managing director of AVCO, identifies three main reasons for the stagnation: "Firstly, since the financial crisis, our institutional investors are looking for a different risk-return ratio and do not go into the asset class. Secondly, Austria is still missing an independent private equity law. The third reason is that many Austrian GPs don't have an AIFMD license and therefore can't do fundraising abroad." However, Marchart notes that foreign funds have started closing the gap left by domestic houses. He is also optimistic that regulators will be proactive in 2016 and start creating a legal framework for private equity.

Despite the undisclosed financial details, Ardian's acquisition of the agrochemicals and fine chemical division of DPX Holding, from former parent JLL Partners, is likely to be Austria's largest private equity deal this year, with an estimated deal value of €100-250m. Runner-up is the impressive series-B of pharmaceutical company Nabriva Therapeutics. The company raised $120m in April, with US investors Vivo Capital and OrbiMed leading the round.

Strong franc shackles Switzerland
The Swiss private equity market experienced a downward trend as well, decreasing by more than half from a solid 11 deals in 2014 to only four in 2015, marking a drastic fall compared to deal volumes of previous years.

A major factor for this development was the decision by Switzerland's central bank to drop the cap on the franc's value against the euro. This weakened the market position of many companies in the country. Daniel Koppelkamm, principal at Mountain Cleantech, observes: "There are a number of usually successful Swiss technology companies that have struggled due to the strong franc. German companies, especially in the technology sector, have profited from that. Some Swiss competitors have not been able to keep up with their German counterparts in terms of pricing."

Christian Böhler, principal at investment firm Akina, saw the Swiss economy limping in the previous two quarters, partly caused by the franc's exchange rate. He predicts a limited number of opportunities for the months ahead: "I can see some activity in the area of distressed companies or those who can't afford a restructuring by themselves. Those opportunities are usually available for a good price."

While private equity opportunities are sparse in the country, Koppelkamm sees growth deals on the horizon: "Due to the strong technical universities such as Zurich and Lausanne, there are many innovative high tech companies, often spin-offs, but they are usually early-stage, many of them even pre-revenue."

Of the 21 Swiss early-stage and expansion deals in 2015, six were in the technology sector. The largest injection was scored by Stans-based software portfolio management service SoftwareOne. KKRs acquired a 25% stake in August, for estimated deal value of €250-500m.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• Buyouts
• Early-stage
• DACH
• DACH
• Top story
• Germany
• Switzerland
• Austria