Mr. Denat, you head up Credit Suisse's corporate client business in Switzerland – and then at the start of last year you also took over the chairmanship of SVC Ltd. Why?
Private equity fascinates me. During the 20 years I spent working in London I was heavily involved with private equity clients, and it was something I missed when I returned to Switzerland in 2016. So I was really pleased when it was suggested that I should also take on the chairmanship of SVC Ltd. Although SVC Ltd. isn't a private equity fund, the issues facing it are similar. For me it's also a way of doing more to help the SME market in Switzerland.
You immediately set about sharpening up SVC Ltd.'s strategy. Why?
I thought the areas in which SVC Ltd. operates were a little too broad – that we needed more focus. Our approach is two-pronged: On the one hand we're putting a greater emphasis on more mature companies; they have a more stable performance, which helps lessen the risk profile of the portfolio as a whole. In Switzerland they also have greater financing needs than start-ups, which have access to a comparatively wide range of offerings.
And the second change?
We decided to focus our investments in the early-stage segment on a few strategic areas we derived from the Credit Suisse supertrends: robotics & automation, medtech, and fintech. These are areas in which a strong start-up scene is developing, especially in Switzerland.
Why this focus?
We aim to specialize in the chosen areas, and to position ourselves in the market accordingly together with industry partners and our network. By focusing we can create synergies: It's more efficient to examine two medtech companies than it is to examine a medtech company and a mechanical engineering firm, for example. Experience is very important, particularly at the early stage.
SVC Ltd. is now investing in fintechs, i.e. companies that are innovators within the financial industry. Doesn't that mean creating future rivals to Credit Suisse?
You're right, it's an important issue for the bank. However, we see it as an opportunity to keep abreast of what's happening on the scene as well as be in a position to exploit any innovations for ourselves too. What's more, they often make good financial investments: The increased valuations in these areas are very attractive at the moment. SVC Ltd. has received an additional CHF 30 million additional capital for fintech investments; this is managed by its own fintech investment committee, which consists of experienced fintech experts from the bank as well as external experts.
What are the other new developments?
I'd like to improve the interface with Credit Suisse, especially in relation to the sourcing of deals ‒ that's always the big question in this industry: How do you find interesting opportunities? Being in the Credit Suisse corporate client business means we're constantly in touch with potential businesses – indeed we have 100,000 corporate clients. If one of these firms is looking to grow with the help of venture capital, SVC Ltd. should always have the opportunity to examine the business and make an offer – the client will be the biggest beneficiary.
You head up Credit Suisse's corporate client business in Switzerland, where the bank positions itself as the bank for entrepreneurs. What role does SVC Ltd. play in that respect?
It's a clear differentiator in the marketplace. We are the pioneers in Switzerland, having become active in this area with our own private equity arm. But through its investments SVC Ltd. also wants to help promote Switzerland as a place for business and employment. The maximization of profitability shouldn't be the main objective, but SVC Ltd. must be able to sustain itself in the long term.
That seems to be working.
Yes, we have generated a profit from the firms we have exited to date; this has helped us cover the minimal write-offs and operating costs of SVC Ltd., as well as build up the investment capital further. I think we'll go on seeing successful sales in the next few years – the companies in the SVC Ltd. portfolio have done a superb job in the vast majority of cases, and the economic climate is favorable: Given low interest rates, investors are looking for investment opportunities.
Turning to the portfolio companies: How well are they positioned in digital terms?
Our best performers are entirely digitalized: design, production, distribution, credit risk management, bookkeeping, finance ‒ everything. That's the only way these companies can survive in today's fiercely competitive world. Digital solutions help with separating out a company's various activities and focusing on what really generates added value.
The high investment costs of full digitalization often constitute a huge burden for SMEs.
You need to invest smart. Firms should first of all ask which solution they themselves intend to cover. These days there are so many good start-ups they can partner with. The next question is whether the company wants to buy something. Products may be available on a variable cost basis, enabling a major investment to be avoided – for example, I'm thinking about storage space that can now be rented on an affordable basis in the cloud.
Finally, a little digitalization test for you: Do you read the newspaper online or on paper?
Digital only. I go through all the press on my iPad every morning. Sometimes we buy a printed copy at the weekend for the whole family to read at breakfast – though the children find a printed newspaper slightly strange.
Now on my mobile phone too.
Do you carry cash in your wallet?
Yes, but never enough – I always forget to go to the ATM. In any case I almost always pay with debit cards or TWINT.
What about your car?
Touché! I'm not a fan of modern cars, and am passionate about classics. I need to hear the noise of the engine, and I love the smell of oil and gasoline. However, I do cycle to the office on my e-bike. It's incredibly good: a modern, high-quality Swiss product that's highly innovative and reliable. The e-bike is linked to my mobile phone, so I even have active control over the battery – a perfect example of Swiss innovation and engineering skill.
Didier Denat is Chairman of the Board of Directors of SVC Ltd. In addition, he is Head of Corporate & Investment Banking at Credit Suisse (Switzerland) Ltd. and is a member of the Executive Board. He was previously Co-Head of Global Financial Sponsors in London and Head of Leveraged Finance and Sponsors Group in the EMEA region. Before joining Credit Suisse, Didier Denat spent nine years at Citibank in various locations (Zurich, New York, London, and Paris). Originally from Geneva, he has a degree in Management & Strategy from the University of St. Gallen, is married with three children, and lives in Zurich.