Mergers and acquisitions in the European Community are expected to rise 20% over their 2009 levels.

Analysts are watching the takeover attempt of Cadbury by Kraft in the UK for $10.5 billion as a sign of events to come during 2010.

The last data coming from Mergermarket confirms the trend during the Q4 of 2009 toward acquisitions and mergers to grow market share, a key strategic wind shift from mergers of necessity related to the financial crisis to mergers of opportunity to achieve growth.

According to a survey published in December by Boston Consulting Group and UBS, roughly 20% of the managers surveyed indicated that they were planning a major merger operation for 2010. Merger activity is expected to be largest in the United States. More generally, analysts are expecting 2010 to mark the return to a more normal economic environment, using more traditional modes of financing and less risk.

For such consolidations and restructurings to occur, several factors need to be simultaneously present. First, there needs to be a realistic valuation of companies with an adequate balance of profits and reserves and the measure of taste for risk; a climate of confidence needs to return.

In this context, pharmaceutical companies or companies dealing in raw materials, or financial insitutions will be particularly active and an increasingly preponderant role will be played by companies operating in emerging economies.

Analysts also underline that financing of operations will rely on cash or exchange of stock, though the market expects several more months of cheap money during which time companies can finance their operations with cheap loans.

The disappearance of banking secrecy in Switzerland may result in an irrevocable loss of roughly 25% of revenues from Swiss private banks.

Analysts from the Research Institute in Basel (BAK) added that even a complete removal of banking secrecy would not result in total flight of foreign capital in Switzerland, since a significant part of these account are held by institutional investors or Middle Eastern customers unconcerned about banking secrecy.

Moreover, according to the chief economist Urs Müller, “all the accounts in Switzerland aren’t necessarily undeclared funds.” The BAK economist further hypothesized that rising financial markets would permit the financial sector a slightly better than average growth.

Among the chief economist’s other entertaining assumptions and uncorroborated hypotheses are that the Recession has already hit bottom, that the Swiss financial sector will recover first, and that other sectors like machines tools, consumer goods, and luxury watches will follow.

The BAK maintains that the Swiss economy will grow between 1.5% and 2% in the medium term. BAK Basel has 25 years of experience drawing up forecasts of economic development at the Swiss and international level.

Their website (bakbasel.ch) doesn’t indicate what percentage of their forecasts turn out to be correct.

Every year the WEF, based in Switzerland overlooking lake Geneva, publishes a global ranking of the most competitive economies.

This year the WEF noted that Switzerland was characterized by both an excellent environment of innovation as well as a sophisticated business culture.

The WEF also noted that Switzerland had been much more resistant than the US and Europe to the world economic crisis. Further, the problems in the financial sector were much less pronounced in Switzerland than elsewhere in Europe or in the US. In effect, problems in the Swiss bank sector were essentially circumscribed to UBS.

Switzerland also earned its first place for its top research institutes and excellent collaboration between its research institutes and the private sector. Switzerland’s public institutions are among the best in the world and its infrastructure was rated as excellent.

However, the WEF noted that access to university education in Switzerland remains weak – on this criterion Switzerland was rated 46th globally. Even if immigration is allowing Switzerland to compensate for the penury of educated qualified professionals on the Swiss job market, the WEF recommended that Switzerland raise the level of average education to better respond to the needs of an advanced economy.

The WEF’s ranking was a welcome shot in the arm for the Swiss economy, which has nonetheless suffered slowdowns and layoffs in the luxury watch making, textile and hospitality industries.

Among the sectors, flourishing despite the overall economic in Switzerland, the insurance industry remains strong, with an industry unemployment rate below 2%.

The energy sector is also doing very well — every business and sector touching production of electricity, gas, air conditioning, etc – with an industry unemployment of about 1.5%. Another sector oblivious to moroseness is teaching: teachers are practically untouched by unemployment with the sector showing slightly more than 2% of teachers without a job.

Among the professions which appear to be crisis-resistant are managers – there seems to be no end to jobs for managers who can streamline, rationalize, increase productivity, etc. – top IT specialists, and finance professionals. The majority of cuts that some banks have had to make due to strong declines in revenues have not been in trading and finance, and job offers for top financial talent remain strong.

Tangentially, the World Economic Forum is among companies, organizations, and institutions having resisted the crisis, and with its chic campus in Geneva’s ritziest suburb and solid revenue stream of expensive membership fees, is an attractive employer in the Geneva area.

Order books, particularly of exporting Swiss industries continued to empty during the second trimester, with orders falling strongly. Inside analysts say the the drop in business is as bad as it was in 1991.

Sales figures registered a 13% drop with respect to the same period in 2008. Output dropped 15% according to the Federal Statistics Office (OFS).

The results support the arguments that a return to a robust health will take considerably more time for Swiss exporters.

Bulgari is preparing to let go 50 staff at Daniel Roth and Gérald Genta Haute Horlogerie SA. The administrative center in Meyrin is expected to bear the brunt of the cuts with 45 of the 50 layoffs. The management at Bulgari has already discussed with staff the company’s intention to drastically reduce headcount at the two brands.

Dow chemical will be closing its European offices at Morges and concentrate its activities in Horgen (Zurich). After the purchase of its competitor Rohm Haas the American chemical group had two centers in Switzerland. Roughly 40 staff were offered a job at the Horgen offices. Before announcing the definitive closing of the Morges offices, 25 staff had already left on their own.

Elsewhere, numerous companies have been launching restructuring programs in response to the poor economic climate.

Since the beginning of the year, Holcim, Swiss Re, UBS, Credit Suisse, and Adecco have all eliminated thousands of jobs. Holcim (cement; St. Gallen) reduced its headcount by nearly 10,000 workers, down to 81,500.

In April Swiss Re announced the elimination of 1200 jobs and a cost reduction program to save CHF 400 million. En 2009, the management expects a saving of CHF 150 million.

UBS cut 4400 jobs through end June, to settle at 71,806 staff, and there are a further 4800 jobs to be cut, according to management. Last spring UBS put some of its staff on partial unemployment – a watershed event: no Swiss bank had ever done that before. The measures actually were directed at their HR recruitment staff. Zurich accepted the request; the canton of Vaud refused it.

In July Credit Suisse indicated it cut 4900 jobs. At the end of June the Bank has 46,700 staff.

ABB wants to economize $ 2 billion, with the half the savings accrued in 2009 but has so far not made any major staff cuts.

The prognostics for Switzerland in 2010 are not especially optimistic.

According to the Swiss unions, purchasing power will strongly decline in 2010 as prices rise, inflation begins, and salaries stagnate.

We might point, at this juncture, that the unions and syndicates of Switzerland were all willing advocates of the open markets in Switzerland and the integration with the European community, which is the principal causative factor of the decline in purchasing power and standard of living.

Currently the unions are predicting a decline in the gross national product of about 3%, with a further decline in 2010 of perhaps 1%. The unions’ predictions are more pessimistic than the government economist’s because they take into account precisely the decline in purchasing power which will have a strong effect on the Swiss economy for some time to come.

The decline in purchasing power of Swiss households is estimated to diminish by several billion francs in 2010 as a result of the massive rise in health insurance premiums, a rise in the CO2 tax, and austerity measures by the different cantons to brake the acceleration of public debt. Overall the forced savings represents about 1% of the GNP – about 5 billion francs. Converted into employment, this equals about 40,000 jobs !

The current recession is expected to follow a W pattern and the positive signs of improvement are expected to reveal themselves later on as just a simple renewal of stocks. The small perceived rise in production is not a sign of rise in demand as claimed by certain over-optimistic observers. And the rise in unemployment is expected to further damage demand down the road.

A variety of economists and commentators are expecting to see over 250,000 unemployed by 2010. This constitutes a historic record for Switzerland and of course the record unemployment will cause ancillary damage in psychological problems and other health and social problems.

Further, 2009 has seen the destruction of banking secrecy in Switzerland, leading to an important exodus of foreign funds under management in Switzerland. Subsequent to the agreement made with the United Sates, the Swiss federal government is now besieged with demands for similar cooperation from France, Germany, Turkey, and elsewhere.
No one has yet provided a credible estimate of the part of GNP made up by the Swiss financial services sector but private estimates such as by Banque Pictet in Geneva have estimated that the removal of Swiss banking secrecy will cost roughly 100,000 jobs in Switzerland.

In 2009, 75% of companies in Switzerland have reduced their HR budgets, and lowered expenses related to salaries and personnel.

Responding to the economic slowdown in Switzerland and the uncertainties of markets, companies have lowered their forecasts for salary growth to roughly 2% for 2009. There are overall substantially fewer job vacancies on the employment market and fewer professionals are electing to change jobs in the current economic climate.

Currently, according to recent surveys, approximately 35% of companies believe their business will shrink in 2009, while another 35% think that their business will remain at the same level; about 20% expect an increase in their sales revenues for 2009.

To reduce budgets allotted to personnel, companies are counting on a variety of measures. First, 50% of employers are planning to reduce hiring or in some cases to fire staff. In order not to lose the talents and knowledge base of colleagues in place they prefer to act primarily on new recruitment rather than to let go existing staff; two-thirds of companies have instituted hiring freezes over the next 6 – 12 months.

Other steps being taken by companies include reducing the variable portions salaries, such as bonuses. Approximately one-third of companies forecast reductions for all employees, slightly less than a third forecast reductions for managers.

About a third of companies will reduce the number of promotions and 20% will push a few months into the future decisions on salaries, which will leave time to examine how the economic situation evolves.

Already many multinationals have announced cost cutting steps to their employees. At the same time, independent HR consultancies note that top companies are reserving considerable funds in the form of special budgets to compensate and retain their top talent and particularly performant staff.

In the current troubled economic climate, HR departments feel themselves under attack: more than 90% of big companies report forecasting reductions for their HR departments in 2009 and about a third are planning to cut HR staff. The reductions are symptomatic of a general shrinkage in recruitment resulting in fewer job opportunities, fewer companies at recruitment fairs and fewer opportunities for graduating students and professionals at the start of their careers, and greater uncertainty in the employment market.

Many companies whose business is recruitment are shifting some of the business activity to coaching, staff development, or outplacement services for their corporate clients.