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Published: Mar 20, 2023
Updated: Mar 20, 2023

UBS Acquires Credit Suisse in Record-Breaking Government-Brokered Deal

In a historic move, UBS Group AG has acquired Credit Suisse Group AG in an all-share deal worth over $2 billion. The Swiss National Bank has also offered a $100 billion liquidity line to UBS as part of the deal. The acquisition is seen as a government-brokered solution aimed at containing a crisis of confidence that threatened to spread across global financial markets.

The Background

Credit Suisse has been experiencing a massive rout in its stock and bonds over the past week following the collapse of smaller US lenders. A liquidity backstop by the Swiss central bank midweek failed to end a market drama that threatened to send clients or counterparties fleeing, with potential ramifications for the broader industry. US authorities have been working with their Swiss counterparts because both lenders have operations in the US and are considered systemically important in Switzerland.

The Deal

UBS had earlier tabled an offer of about $1 billion, or 0.25 francs a share for Credit Suisse, which the firm had pushed back on. UBS agreed to a softening of a material adverse change clause that would void the deal if its credit default spreads jump. The takeover of the 166- year-old lender marks a historic event for the nation and global finance.

UBS vs Credit Suisse

UBS traces its roots back through some 370 separate institutions over 160 years, culminating in the merger of the Union Bank of Switzerland and the Swiss Bank Corporation in 1998. After emerging from a state bailout during the 2008 financial crisis, UBS built a reputation as one of the world's largest wealth managers, catering to high- and ultra-high net worth individuals globally.

While Credit Suisse avoided a bailout during the financial crisis, it has been hammered over recent years by a series of blowups, scandals, leadership changes, and legal issues. Clients had pulled more than $100 billion of assets in the last three months of last year as concerns mounted about its financial health, and the outflows continued even after it tapped shareholders in a 4 billion-franc capital raise.

Marks a significant event ; may influence Indian markets as a positive event.

The acquisition of Credit Suisse by UBS is a significant event in global finance. The deal is seen as a government-brokered solution to contain a crisis of confidence that threatened to spread across global financial markets. The takeover marks the end of Credit Suisse's struggles to adapt to a changed banking landscape after the financial crisis. Meanwhile, UBS has emerged as one of the world's largest wealth managers, catering to high- and ultra-high net worth individuals globally.