SWITZERLAND(2)

In what is normally a quiet market, pan-European buyout firm BC Partners and hedge fund subsidiary Cheyne Special Situations Fund have been doing their best to liven up the tranquil buyout scene in Switzerland this year.

At the end of August, Swiss plastic company Quadrant's board refused the two firms access to its books ahead of a likely joint offer of between CHF825 million and CHF908 million (€501-€552 million; $686-$756 million). The board claimed the bid would potentially damage the company's future, arguing that a leveraged take-private deal would jeopardise its planned growth strategy.

However, the rejection is itself controversial given the significant premium of the planned offer to the company's share price. Some investors are reported to be dissatisfied with the board's decision.

BC Partners had already managed to provide a stellar event in the Swiss buyout market this year through a CHF2.8 billion exit from Swiss hospital group Hirslanden Finanz to South African company Medi-Clinic. The buyout firm realised a significant return having acquired the company for €653 million in 2002.

The need in Switzerland is to develop deals yourself; you cannot wait for a phone call informing you of an auction

Rolf Friedli

The two deals noted above are in danger of painting an unrealistic picture, however. In comparison to the generally bristling European private equity scene, activity has been slow in Switzerland. The only financial sponsor buyout of note in the first half of the year was Munichbased Allianz Capital Partners' €1.1 billion acquisition of Selecta from UK catering company Compass Group. Statistics published by the UK's Centre for Management Buyout Research show there have €1.4 billion worth of deals in the country this year in total – a figure significantly skewed by the Selecta deal.

This is not to say that local GPs are unhappy with their lot. The largest domestic firm, Zurich-based Capvis, is reported to be on the road to raising a new €500 million fund and, according to one investor, its prospects of reaching the target are promising. Capvis, which declined to comment on the fund's progress, raised a €340 million second fund in 2004.

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Participants say the Swiss market is a difficult one in which to establish market share. Rolf Friedli, a partner at Capvis, says: “The need in Switzerland is to develop deals yourself; you cannot wait for a phone call informing you of an auction. We've been on the ground for 15 years and we're not worried about the market at all.”

Capvis' domestic rival Argos Soditic raised its fifth fund last year on €275 million. Guy Semmens, a partner at the firm, says: “Switzerland is a much smaller market than most others in Europe with 6.5 million people, yet it has a number of interesting things which single it out. There are a limited number of firms who look at buyouts in this market and we believe there are opportunities for better returns than anywhere else.”

Semmens says the wide availability of skilled management professionals in the country make successful ownership easier. The country's geographic split, with an Italian population in the South East, a French population in the South and a German population in the North, provides local teams with an acute knowledge of cultural idiosyncrasies and facilitates better trading relationships around Europe.

However, the opportunity does remain limited. Lars Niggemann, an investment director at Pföffikon-based CGS Management, which targets companies worth CHF10 million to CHF80 million, says: “There are a lot of small companies potentially available in Switzerland, yet there is probably not too much room for players in the Capvis league.”

Aside from the occasional flutter of excitement as larger, pan-European buyout firms parachute into Switzerland, it remains at heart a modest market. The small clutch of domestic GPs plying their trade in the country have no problem with that, however.