The changing face of Swiss private equity
The small size of the country and consequently of its private equity market makes it difficult to identify trends in the Swiss private equity market. However, it is clear that like its European counterparts it suffered a slowdown in activity related to the poor performance of the stock market in 2001-2003. According to the European Venture Capital Association (EVCA), the Swiss private equity market has shown reasonable growth over the past five years but still lags behind other similar-sized countries when it comes to the percentage of private equity deal-flow relative to its GDP.
However, the past few years have witnessed some innovation and a number of notable changes within the industry. Thomas Kubr, managing director at independent private equity house Capital Dynamics, remarks that, since the late 1980s, Switzerland has emerged as a base for private equity asset management. “Currently, well over $15bn (e11.5bn) of private equity assets are managed out of Switzerland,” he says.
“We have a world-class infrastructure, and can compete with global players. There isn’t another European centre with as many private equity groups that are qualified to give investors such a high level of service.”
According to Massimo Lattmann, chairman of the Swiss Private Equity and Corporate Finance Association (SECA) and founding partner of Zurich-based Venture Partners AG, the industry has developed a variety of very professional asset managers and a good network of corporate financiers and specialist advisers in recent years.
At first glance, Switzerland appears to have some natural attractions for would-be private equity investors. These include a liberal legal and economic system, liberal labour laws and a number of mid-sized companies, which are good acquisition targets for private equity players.
A trend towards greater transparency and professionalism is apparent in the Swiss market. This development was accelerated by the downturn as well as the arrival of pension funds into the asset class. Following depressed equity markets, private equity is now perceived as a necessary element to institutional and high net worth portfolios. Other consequences of the market downturn include a greater number of secondary transactions and a shift from venture capital to buyout transactions. A limited number of domestic investment opportunities and the increasing globalisation of the industry have also led Swiss investors to look outside Switzerland.