Sale-and-Leaseback – How a Precision SME Bridges the Tariff Crisis
Key facts
- Area
- Finance
- Company
- Precision supplier (SME)
- Operating property
- Value CHF 9 m, mortgage CHF 3.5 m
- Solution
- Sale-and-leaseback
- Result
- around CHF 4.6 m of fresh funds
- Effect
- Expansion without new bank debt
Names, figures and details have been changed to protect confidentiality.
The e-mail from Ohio arrives on a Thursday in August and is politely worded. The largest customer in the US is postponing two call-off orders “until further notice”. Andrea M. reads it twice, then opens the liquidity plan. A few days earlier, the US imposed an additional 39 percent tariff on Swiss exports. For a company that generates almost half its revenue across the Atlantic, this is not a detail but a question of survival.
A plant full of know-how and no reserves
Andrea M. runs the company in the third generation. In its own production hall, 85 employees manufacture precision parts for semiconductor equipment and medical technology, with tolerances measured in thousandths of a millimetre. Customers value the quality and pay for it, as long as the price at the border does not explode.
The following months are tough. Margins melt away because the company absorbs part of the tariff itself to keep its customers. The operating credit line is soon exhausted. Then, in November, relief: US additional tariffs on most Swiss exports are capped at 15 percent. But the months at 39 percent have left their mark, and even 15 percent is a burden that remains.
US additional tariff on Swiss exports
For most industrial goods
FiPAXThe months at 39 percent drained margins and liquidity at many suppliers.
Andrea M. knows what needs to happen. The company must become less dependent on the US and win new customers in Europe, with a sales office in southern Germany and trade fair appearances over the next two years. That costs money the bank is no longer willing to lend in this situation.
The capital is standing on the company’s own land
At FiPAX, the first meeting begins with a question that surprises Andrea M.: what is your hall actually worth? The answer comes from an independent valuation: around CHF 9 million. It carries a mortgage of CHF 3.5 million. More than CHF 5 million of equity is therefore locked up in the walls, doing nothing except putting a roof over the business.
The idea is simple, yet still relatively uncommon in Switzerland. The company sells the hall to an investor and immediately leases it back, long-term and on fixed terms. Nothing changes in production, and no workstation moves. But the tied-up capital is released.
I was always proud that we owned the hall. Until I realised that this pride was costing us our future.
Calculate first, then sell
Before a single investor is approached, FiPAX models the entire transaction. The hall has been carried at a low book value for years. A sale releases hidden reserves, which are taxed. Fees and advisory costs come on top. Only once it is clear what will actually flow into the company after all deductions can the step be properly assessed.
The other side of the equation matters just as much. The rent becomes a new fixed cost that must be paid in weak years too. FiPAX tests it against the company’s business plan, including a scenario in which US sales stagnate for another year. Only when the rent remains affordable in that case as well does the board give the green light.
Seven investors, one lease
Instead of negotiating with a single buyer, FiPAX runs a structured bidding process. Seven institutional investors receive a dossier with the valuation, a draft lease and credit documentation. Four submit offers, including two pension funds and a real estate fund.
The highest bid does not win. One bidder offers CHF 300,000 more but demands full indexation of the rent and a term of only ten years. The company chooses a pension fund that accepts a 15-year lease with two renewal options, only partial indexation and a right of first refusal for the company should the hall be sold again later. For a manufacturer that cannot simply move its machines elsewhere, certainty is worth more than the last franc of the price.
From the first meeting to the notary
Around four months for a transaction that repositions the company
FiPAX
What actually reaches the company
The sale repays the bank’s mortgage in full. After taxes and costs, around CHF 4.6 million flows into the company. That is more than the bank would have granted as additional credit even in good times, and it is equity, not a new IOU.
From sale price to net proceeds
Amounts in CHF million
FiPAXThe tax consequences were calculated before the sale, not after.
The money is not distributed but put to work. Part of it repays the exhausted operating credit line so that day-to-day business has room to breathe again. With another part, the company opens a sales office in southern Germany and funds its European market entry for the next two years. The rest is held in reserve in case tariff policy turns once more.
Where the released capital goes
Use of the CHF 4.6 million
FiPAX
The outcome
The business stays where it is, the machines keep running, and nobody on the workforce notices any difference on the Monday after the notary appointment. The company finances its expansion into new markets without new bank debt, and its dependence on US business falls year by year. Eighteen months later, 15 percent of revenue already comes from customers in Germany and Austria.
Andrea M. says today that while the hall no longer belongs to her, the company’s future does again. The pension fund, she adds, has turned out to be a more pleasant landlord than the bank was as a creditor.
Is too much capital tied up in your business premises?
A sale-and-leaseback is not right for every company. What matters are the tax consequences, the affordability of the rent and a lease that secures the site for the long term.
We will work through the numbers with you before you make a decision.
Out of respect for our clients’ confidentiality, names, figures and other details have been altered or are illustrative.