Swiss watch company mergers to rise, says industry

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The Swiss watch industry has expressed an opinion that the level of mergers and acquisitions will rise in the next 12 months as watchmaking companies embrace a strategy of verticalisation to address local sourcing issues.

Almost two thirds of respondents to the Deloitte Swiss Watch Industry Study 2012 hold this view, believing that the formation of large supplier groups, as well as acquisitions of larger producers by brands, will shape the market in the coming year.

More than 30% of the 50 leading executives interviewed by Deloitte said that they consider a shortage of skilled labour a risk to their company, as well as the availability of third-party parts and movements. Deloitte asked executive for their opinions on the pending Comco decision to allow Swatch Group to reduce access to its products and this was met with a mixed response, while nearly all interviewed supported the Swiss Made legislation created to protect the Swiss watchmaking industry.

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Several executives surveyed said that they are planning to push sales through owned and operated e-boutiques, and that the trend for brands opening their own boutiques is still gathering pace.

The survey also asked about the economic climate to which the majority of respondents described themselves as feeling cautiously optimistic, with just 31% feeling fully optimistic. There is growing concern in the community about the global economy and the effect it will have on exports, although hopes are still high for Asia with 58% of those asked expecting growth in exports to the region in the next 12 months.

Deloitte partner in corporate finance Jean-Francois Lagasse said: “Worries about a possible growth slowdown in the main export markets are persistent with the executives. But the growth of the Chinese and other emerging markets is still high – and there are still untapped opportunities for the Swiss watch industry in many of these markets including China.”

Currency woes continue to dominate much talk in Switzerland, with the high Swiss franc proving a particularly tough challenge for smaller brands and manufacturers, but Deloitte believes that the outlook is a positive one for the industry.

Deloitte lead partner of consumer business Howard da Silva said: “Though times are tough, the range and depth of the business strategies of the Swiss watch industry remain formidable. This industry has managed the ups and downs of fate and fortune for more than 400 years – and there are no signs of it ceasing to do so.”

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