Private M&A Comparative Guide -

1 Deal structure

1.1 How are private M&A transactions typically structured in your jurisdiction?

In general, the prevailing structures for M&A transactions in Switzerland are share deals and asset deals. The preferred (and most common) structure in practice is the share deal – particularly for targets which are held as private assets by individuals as sellers. Asset deals are often chosen in specific situations, such as for the acquisition of:

banks (due to regulatory and risk considerations); and
companies in distress.

Other transaction structures that are sometimes used include the following:

In transactions with a broad and diffuse sell side (eg, where former employees hold minority stakes and are not taking part in the sale), a squeeze-out of minority shareholders by way of merger against cash consideration may be carried out if the buyer manages to acquire at least 90% of the voting rights in the target.
With respect to distressed or rapidly growing companies (eg, start-ups), buyers often acquire a (minority) stake through a substantial share capital increase in the target (either against cash considerations or by way of set-off against a pre-existing loan/receivable).

1.2 What are the key differences and potential advantages and disadvantages of the various structures?

The advantages of a share deal primarily relate to:

tax (generally preferred treatment of capital gains); and
simplicity from a legal perspective.

In addition, asset-like items such as tax loss carry-forwards (and other deferred tax assets), as well as potential reserves from capital contribution, are transferred along with the target in a share deal. In turn, the buyer usually also acquires the historic risks of the target and any of its built-in gains/deferred tax liabilities relating to the target's assets.

An asset deal generally allows for the separation of assets and risks. Further, while the seller realises the built-in gains on the assets transferred, the buyer benefits from a step-up in the tax base of the acquired assets and thus from greater potential for tax-deductible depreciations going forward.

In an asset deal, the assets (and liabilities) are transferred either:

separately; or
uno actu through universal succession with a statutory asset transfer, according to the Federal Act on Merger, Demerger, Transformation and Asset Transfer.

While a separate transfer of assets requires the parties to comply with the formal requirements for each type of asset (eg, agreements with third parties, intellectual property, real estate), a statutory asset transfer streamlines the process through the transfer of assets and liabilities based on one single agreement (specific requirements apply if real estate is part of the assets transferred). In turn, the statutory asset transfer triggers the joint liability of the seller and the buyer for three years following the asset transfer. Depending on the transferor and the qualification of the transferred asset as a whole, only the statutory asset transfer may be available. Specific provisions apply to the transfer of employment agreements as part of an asset deal (see question 10.1).

1.3 What factors commonly influence the choice of transaction structure?

The most common factors are:

the tax situation of the sell side (individual or corporate seller, target shares as business or private assets); and
risk considerations relating to the business and/or assets of the target.

In certain cases, deal economics (eg, the target's need for new cash, available funds on the buy side) play a role in determining the transaction structure.

1.4 What specific considerations should be borne in mind where the sale is structured as an auction process?

In auctions, the sell side usually prepares the first draft of the transaction agreement. Bidders are often reluctant to revert with a heavy mark-up – in particular, to ask for:

conditionality (eg, conditions precedent/closing conditions); and
broad indemnities/representations and warranties.

Bidders should also consider the sell side's tax situation and revert with a tax-optimised transaction structure to make their bid more competitive. Additionally, a trend largely supported by auctions is an increase in warranty and indemnity insurance solutions in the Swiss M&A market.

2 Initial steps

2.1 What agreements are typically entered into during the initial preparatory stage of a private M&A transaction?

In the initial preparatory stage of a private M&A deal, the seller and potential buyers usually enter into confidentiality/non-disclosure agreements regarding the information shared in the process. After initial due diligence, and often upon providing a non-binding offer, the selected bidder (or bidders) is usually provided with access to more extensive documentation in the data room.

Once negotiations have progressed in respect of the deal structure and the commercial terms, the parties may lay down the agreed terms in a non-binding document (eg, a letter of intent, term sheets, memorandum of understanding).

2.2 Which advisers and stakeholders are typically involved in the initial preparatory stage of a private M&A transaction?

The buyer and seller are usually supported by legal, tax, financial and accounting advisers. Frequently, the buy side also mandates external valuation experts – in particular for the acquisition of real estate companies. Less often – and primarily depending on the business to be acquired, as well as the type of buyer (eg, private equity or a strategic buyer) – advisers covering areas such as information technology and post-closing integration are involved.

For share deals, there are usually no stakeholders other than the seller(s) involved. In asset deal, specific provisions apply to the transfer of employment agreements (see questions 10.1 and 10.2).

2.3 Can the seller pay adviser costs or is this limited by rules against financial assistance or similar?

Financial assistance in private M&A transactions is primarily limited by corporate and tax law. Both corporate and tax law require the target to act in its own interests and not in the interests of the shareholders or other related parties. Also, the target must maintain the arm's-length principle in dealing with related parties. Hence, financial assistance by the target for its own sale is generally considered a deemed dividend distribution.

Under corporate law, the target's shareholders, directors and other related parties may have personal liability vis-à-vis the company for amounts received as deemed dividend distributions. As such liability must be claimed by the company (or by a shareholder for payment to the company), the practical relevance of such liability is essentially limited to insolvency cases.

For tax purposes, the amount of such deemed dividend distribution is:

subject to Swiss withholding tax; and
added back to the taxable profit of the target.

Further, value-added tax (VAT) incurred in connection with the financial assistance may not be refundable as input VAT at the level of the target.

In practice, there is often some room for discussions with the tax authorities with regard to the target bearing certain transaction costs (eg, for due diligence, to the extent that it can be demonstrated that the target also benefits from such review of its operations). Also, in transactions with a large number of sellers, the target may enter into agreements with the advisers and on-charge the adviser fees (with or without a mark-up) to the respective sellers on a pro rata basis. Due to the limitations on financial assistance, an advance tax ruling should be sought before routing transaction costs through the target.

3 Due diligence

3.1 What due diligence is typically conducted in private M&A transactions in your jurisdiction and how is it typically conducted?

The most common approach is red-flag due diligence, potentially combined with a more in-depth review of specific areas (eg, real estate, labour law, environmental risk). Besides the review of the documentation provided in the data room, the process often includes:

management interviews; and
sessions with the target's advisers.

3.2 What key concerns and considerations should participants in private M&A transactions bear in mind in relation to due diligence?

Due diligence should reflect a commercial approach, ideally proposing:

possible risk mitigation measures; and
a reasonable negotiation point.

Further, the adviser preparing the due diligence should be informed as early as possible in the process about potential warranty and indemnity insurance, as this impacts the level of detail and scope of the report.

3.3 What kind of scope in relation to environmental, social and governance matters is typical in private M&A transactions?

In private M&A transactions, environmental, social and governance matters are not regularly in scope of the due diligence. However, there are sector-specific exceptions in practice, such as including environmental matters in the due diligence process for targets in the commercial real estate/chemical business.

4 Corporate and regulatory approvals

4.1 What kinds of corporate and regulatory approvals must be obtained for a private M&A transaction in your jurisdiction?

By default, M&A transactions are not subject to approval by corporate and regulatory bodies. However, there are various exceptions, as follows.

Merger control under competition law: In terms of merger control under competition law, transactions resulting in a change of control must be notified to (and are subject to approval by) the Swiss Competition Commission if either:

certain turnover thresholds are met; or
at least one of the involved companies has been – through a legally binding decision – found to be dominant in a market in Switzerland and the transaction concerns either:
- that market;
- an adjacent market; or
- an upstream or downstream market.

The turnover threshold is met if, in the financial year preceding the concentration:

the parties concerned together reported a turnover of at least CHF 2 billion or a turnover in Switzerland of at least CHF 500 million; and
at least two of the parties concerned each reported a turnover in Switzerland of at least CHF 100 million.

Specific rules may apply based on the area of business of the involved companies – for example, for insurance companies, banks and other financial intermediaries, as well as telecommunications, media and aviation companies. Further, public tender offers are subject to approval by the Swiss Takeover Board.

4.2 Do any foreign ownership restrictions apply in your jurisdiction?

Generally, Swiss law imposes no restrictions on foreign ownership. However, there are several important exceptions to this, as follows.

Real estate situated in Switzerland: In practice, a central exception is the Federal Act on the Acquisition of Real Estate by Persons Abroad (‘Lex Koller'). The act applies to ‘foreign non-residents' as defined by law – essentially:

non-Swiss citizens who are not resident in Switzerland;
legal entities that are resident outside Switzerland; and
Swiss resident legal entities that are controlled by foreign non-residents.

The acquisition of Swiss-situated real estate or legal entities holding Swiss real estate by such foreign non-residents is subject to permission from the competent cantonal authority unless:

the property is used as a permanent business establishment; or
another exception applies (eg, for owner-occupied properties).

Sector-specific restrictions: The acquisition of a controlling stake in companies holding a banking, securities trading, insurance, healthcare, pharmaceuticals or radio or television broadcasting licence is subject to prior approval by the competent regulatory authority. The acquisition of minority stakes is usually subject to additional notification or consent requirements.

4.3 What other key concerns and considerations should participants in private M&A transactions bear in mind in relation to consents and approvals?

A preliminary draft has been issued by the Swiss Federal Council of a new act that would introduce controls on foreign direct investments in Switzerland. The aim is to avoid possible threats to national security and distortions of competition resulting the acquisition of domestic companies by foreign investors. The draft regulation focuses on:

foreign investors under direct or indirect control of a foreign state; and
acquisitions in ‘critical' sectors (eg, arms manufacturing, power plant operators, certain types of infrastructure).

Although there was considerable scepticism about the proposed regulation, the Swiss government is preparing a revised draft, which is expected in late 2023.

Based on the Federal Act on the Implementation of Recommendations of the Global Forum on Transparency and Exchange of Information for Tax Purposes, bearer shares neither listed as securities on a stock exchange nor structured as intermediated securities had to be converted into registered shares by the end of April 2021 at the latest (or were converted automatically after this date by the competent commercial register). Until the end of October 2024, shareholders that hold non-listed shares in a Swiss company must:

register their shares in the share register; and
disclose the beneficial ownership where the stake is 25% or more of the share capital or voting rights.

As of 1 November 2024, shares that have not been recorded in the share register will be legally void and the rights associated with those shares will be extinguished.

5 Transaction documents

5.1 What documents are typically prepared for a private M&A transaction and who generally drafts them?

In the first phase, the sell side prepares the documentation (eg, information memorandum) and marketing materials regarding the target. To access this information, potential buyer(s) and their advisers must sign non-disclosure agreements (NDAs) provided by the sell side. The preparation of vendor due diligence reports is unusual in Switzerland.

The sell side usually provides the first draft of the transaction documents (eg, share or asset purchase agreement, shareholders' agreement, ancillary agreements). Certain documents (eg, the disclosure letter) are generally drafted by one party without the involvement of the other.

5.2 What key matters are covered in these documents?

Letter of intent or term sheet: This document outlines the preliminary terms, conditions and intentions of the parties, serving as a basis for negotiations. It covers key elements such as:
- the purchase price;
- the deal structure;
- the timeline for the deal; and
- any exclusivity provisions.
NDA/confidentiality agreement: This document is signed by the parties to protect confidential information during the due diligence and negotiation process.
Share purchase agreement (SPA) or asset purchase agreement (APA): This agreement is the core document that sets out the terms and conditions of the transaction, including:
- the purchase price;
- the scope of the assets or shares being transferred;
- representations and warranties;
- post-closing obligations;
- indemnities; and
- any specific conditions for closing.
Disclosure letter or schedule: The seller provides a detailed disclosure letter or schedule accompanying the SPA or APA, disclosing any exceptions to the representations and warranties made in the agreement.
Employment or transition agreements: If there are specific employment or management arrangements associated with the transaction, separate agreements may be prepared to address matters such as:
- post-closing employment terms;
- non-compete provisions; and
- severance arrangements.
Shareholders' agreement: If there are multiple shareholders or ongoing arrangements post-transaction (eg, reinvestment of the seller in the acquisition structure), a shareholders' agreement is usually agreed to govern aspects such as:
- voting rights;
- board composition;
- transfer restrictions; and
- management of the target.

5.3 On what basis is it decided which law will govern the relevant transaction documents?

Apart from the preference of the parties for their home country's legal system, relevant factors include:

the contractual freedom regarding the terms applicable to the transaction;
the location of the target's key business; and
the availability of a well-established arbitration practice.

Further, the parties often consider the possibility of enforcing judgments in the relevant jurisdictions. In practice, the sell side often pushes through its choice of the governing law.

In practice, Swiss law is frequently chosen as the governing law due to:

its contractual freedom;
its stable political and legal environment; and
easy access to judicial and arbitration proceedings.

6 Representations and warranties

6.1 What representations and warranties are typically included in the transaction documents and what do they typically cover?

In share deals, the statutory provisions on purchase agreements provide very limited protection for the buyer (in essence, legal title and the nature of the transferred assets being securities). Thus, the parties commonly include:

various representations and warranties (R&Ws); and
provisions on the consequences of a breach and the conduct of claims in the transaction documents.

Typical R&Ws include the following:

Title and ownership: The seller represents that:
- it owns the shares being sold; and
- the shares are being transferred free and clear of any liens, encumbrances or third-party claims.
Financial statements: The seller represents that the provided financial statements:
- are accurate and complete; and
- fairly represent the financial condition and operating results of the target.
Compliance with laws: The seller represents that:
- the target has complied with all applicable laws, regulations, permits and licences; and
- there are no pending or threatened legal or regulatory actions against the company.
Material contracts: The seller represents that:
- all material contracts entered into by the target are valid, binding and enforceable; and
- there is no breach or default by any party.
With respect to key contracts, the sell side often represents that no change-of-control provision has been agreed with the counterparty.
Litigation: The seller represents that there are no pending or threatened lawsuits, arbitration or governmental investigations against the company.
Taxes: The seller represents that:
- all tax returns have been filed; and
- all taxes and related obligations have been paid in a timely and accurate manner.
Further R&Ws are common with respect to:
- tax residency;
- tax groups; and
- tax rulings.
Employees and pension funds: The seller represents that:
- there are no labour disputes, claims or collective bargaining agreements affecting the company;
- all employee benefit plans are in compliance with applicable laws; and
- the pension fund has not been underfunded.

Similar R&Ws are common for asset deals to complement statutory law.

6.2 What are the typical circumstances in which the buyer may seek a specific indemnity in the transaction documentation?

One common reason for requesting a specific indemnity is a substantial risk identified in the due diligence process. Typically, this risk cannot be mitigated before closing and has a certain probability but is not sufficiently certain to be considered in the purchase price calculation/bridge. A second type of specific indemnity (often designed as a covenant) relates to future acts and omissions of the buyer (eg, not performing certain reorganisations).

6.3 What remedies are available in case of breach and what is the statutory timeframe for bringing a claim? How do these timeframes differ from the market standard position in your jurisdiction?

In case of a breach, the remedies available under Swiss law include the following:

Damages: The non-breaching party may seek monetary damages to compensate for any losses suffered as a result of the breach. The amount of damages will depend on the actual losses suffered and can further include – if explicitly agreed between the parties – consequential and liquidated damages.
Specific performance: In certain cases, the court may order the breaching party to fulfil its obligations under the contract as originally agreed upon. This remedy is more commonly sought where monetary compensation alone would be insufficient.
Rescission: The non-breaching party may seek to cancel or rescind the contract and be released from any further obligations thereunder. This remedy is typically pursued when the breach is fundamental or renders the contract unenforceable.
Injunction: In some cases, the court can issue an injunction:
- to prevent the breaching party from taking certain actions; or
- to compel it to take specific actions to remedy the breach.

Especially in transactions with a strong sell-side position, the agreed timeframe for bringing a claim is shorter than the statutory statute of limitations.

6.4 What limitations to liability under the transaction documents (including for representations, warranties and specific indemnities) typically apply?

Cap: The seller's maximum liability under the R&Ws (as well as indemnities) in the event of a breach is regularly capped at a fixed amount as agreed in the transaction documents. This cap is often expressed as a percentage of the purchase price or a fixed monetary amount. Often, a cap equal to one time the purchase price is provided for (especially for fundamental representations). Special indemnities may have a different – usually lower – cap.
Materiality threshold: A materiality threshold sets a threshold for the significance of the breach before a claim can be made. Only breaches that exceed the materiality threshold will give rise to a valid claim, while minor or immaterial breaches will not be actionable. While de minimis clauses are common (eg, except for tax claims), basket clauses (the aggregate amount of the qualifying claims must exceed a certain threshold) are unusual in the Swiss market.
Time limitations: Time limitations are commonly negotiated to set a specific timeframe within which a party can bring a claim for a breach.
Knowledge qualifiers: As in other jurisdictions, knowledge qualifiers can be included, specifying that liability is limited to breaches of which the party had actual knowledge. However, for Swiss transactions, knowledge qualifiers are less common and usually play a minor role.
Exclusions and carveouts: Transaction documents may include specific exclusions or carveouts where certain types of liabilities or damages are expressly excluded from the scope of R&Ws or indemnities.

Under Swiss law, liability in case of fraud cannot be limited, irrespective of the contractual provisions agreed between the parties.

6.5 What are the trends observed in respect of buyers seeking to obtain warranty and indemnity insurance in your jurisdiction?

There is increasing demand for warranty and indemnity (W&I) insurance, fuelled by the sellers' market in recent years, among other things. W&I insurance is usually considered for a ‘clean exit' in transactions with a large number of individuals or a private equity fund on the sell side. Also, W&I insurance is sometimes introduced in cases where there is a stalemate in the negotiation process about who should bear a specific risk.

6.6 What is the usual approach taken in your jurisdiction to ensure that a seller has sufficient substance to meet any claims by a buyer?

If there is doubt as to whether the seller will be able to meet the buyer's claims, the parties often agree on the payment of a portion of the purchase price to an escrow account. This gives the buyer some time after closing to investigate risks or resolve legal disputes. The escrow amount is released to the seller only to the extent that it is not required to cover any claims by the buyer.

Deferred payment of the purchase price may be the preferred approach for the buyer, but it shifts the counterparty risk to the seller (see question 7.6).

6.7 Do sellers in your jurisdiction often include restrictive covenants in the transaction documents? What timeframes are generally thought to be enforceable?

Restrictive covenants are frequently included in the transaction documents, resulting in claims for penalty and liquidated damages in case of a breach:

Non-compete and non-solicitation covenants are typically agreed in acquisitions of management-owned targets with people-focused businesses. To be enforceable, such covenants must be:
- deemed necessary to protect the target's business and value; and
- clearly delimited in scope, duration and relevant territory.
As a reference, the duration must not exceed three years, except in special circumstances.
Common restrictive covenants related to tax include:
- the indirect partial liquidation covenant (see questions 13.2 and 13.4); and
- the business continuation covenant where the target has been demerged from another company (this ensures tax qualification as tax-neutral reorganisation).
Confidentiality and non-disclosure clauses are also typically included.

6.8 Where there is a gap between signing and closing, is it common to include conditions to closing, such as no material adverse change (MAC) and bring-down of warranties?

In the sellers' market of recent years, conditions to closing were agreed less frequently and were often limited to approvals by merger control and regulatory bodies. Although there is a trend towards less conditionality (with even some ‘hell-or-high-water' clauses), no MAC clauses may be seeing a revival due to lessons learned during the COVID-19 pandemic. Bring-down of warranties is not common and is usually difficult for the buyer to negotiate into the transaction agreement, unless (for example):

the target must be carved out first; or
there is a large time lag between signing and closing.

6.9 What other conditions precedent are typically included in the transaction documents?

Other common conditions precedent in the market include obtaining merger clearance and tax rulings.

7 Financing

7.1 What types of consideration are typically offered in private M&A transactions in your jurisdiction?

The prevailing type is cash consideration, which in some cases is converted into an interest-bearing or interest-free vendor loan (eg, in the context of family business successions). Share considerations are typical for:

transactions where the sellers roll a portion of their stake into the acquisition structure (as minority shareholders); and
business combinations (eg, acquisition by way of a merger of the target into the acquiring company).

7.2 What are the key differences and potential advantages and disadvantages of the various types of consideration?

The key differences are:

the economic outcome of the transaction achieved; and
financing considerations.

Hence, there are no general advantages or disadvantages to the various types of consideration.

7.3 What factors commonly influence the choice of consideration?

The primary factors are:

the economic outcome to be achieved through the transaction; and
financing considerations.

For example, if the buyer has neither sufficient equity nor favourable conditions for debt financing, a (partial or full) consideration in cash may be preferred over offering a cash purchase price.

7.4 How is the price mechanism typically agreed between the seller and the buyer? Is a locked-box structure or completion accounts structure more common?

The pricing mechanism mainly depends on the size of the deal. Locked-box structures are more common in the Swiss market than in other jurisdictions and are often used in ‘smaller' deals (eg, standalone targets or small target groups with the Swiss Code of Obligations as accounting standard). The locked-box mechanism is also the preferred method for a ‘clean' exit, due to the reduced risk of post-closing purchase price adjustments. In particular, if there is a long period of time between the locked-box date and closing, the parties often agree on a cash-flow participation or interest component (‘locked-box interest').

In larger transactions, the parties usually rely on completion accounts to determine the purchase price. For example, completion accounts are commonly used in the acquisition of multinational groups, with the accounting rules for the preparation being set out in detail in the transaction agreements.

7.5 Is the price typically paid in full on closing or are deferred payment arrangements common?

Generally, the purchase price is paid in full at closing. Deferred payment arrangements are less common and are typically used to facilitate the acquisition for the seller (eg, in the context of family business successions).

7.6 Where a deferred payment/earn-out payment is used, what typical protections are sought by sellers (eg, post-completion veto rights)?

Specific protections for deferred payments/earnout payments are less common. In particular, guarantees by banks and other third parties are not often considered due to their costs. In some cases, the parties may agree on a pledge of the sold shares to secure the seller's claim for the deferred payment/earnout payment. Otherwise, the seller must rely on the common instruments used to protect the purchase price claim, such as guarantees by the buyer's parent company or shareholders.

7.7 Do any rules on financial assistance apply in your jurisdiction, and what are their implications for private M&A transactions?

Financial assistance in private M&A transactions is primarily limited by corporate and tax law. Both corporate and tax law require the target:

to act in its own interests and not in the interests of the shareholders or any other related parties; and
to maintain the arm's-length principle in dealing with related parties.

Hence, financial assistance by the target for its own sale is generally considered a deemed dividend distribution.

For tax purposes, the amount of such deemed dividend distribution is:

subject to Swiss withholding tax; and
added back to the taxable profit of the target.

Further, value-added tax (VAT) incurred in connection with the financial assistance may not be refundable as input VAT at the level of the target.

In practice, there is often some room for discussions with the tax authorities in regard to the target bearing certain transaction costs (eg, for due diligence, to the extent that it can be demonstrated that the target also benefits from such review of its operations). Also, in transactions with a large number of sellers, the target may enter into the agreements with the advisers and on-charge the adviser fees (with or without a mark-up) to the respective sellers on a pro rata basis. Due to the limitations on financial assistance, an advance tax ruling should be sought before routing transaction costs through the target.

7.8 What other key concerns and considerations should participants in private M&A transactions bear in mind from a financing perspective?

With regard to acquisition financing, the Swiss tax authorities do not usually accept a full debt pushdown to the target: some tax authorities disallow an interest deduction for up to five years from closing, while others deny it in general. Hence, a contemplated debt pushdown should be considered in the structuring (eg, through a cascaded acquisition, a debt-to-equity swap or a leveraged dividend).

8 Deal process

8.1 How does the deal process typically unfold? What are the key milestones?

The deal process varies based on factors such as:

the number of potential buyers;
the target's business; and
the approach chosen (eg, an auction process).

Typically, the process and the key milestones are as follows:

Preparatory phase: The seller may gather preliminary information and prepare marketing material and a confidential information memorandum to share with potential buyers. The buyer conducts initial research and due diligence to assess:
- the target's financial health, operations and market position; and
- potential synergies.
Indicative offers and negotiation: The buyer submits an indicative offer based on its initial assessment. Negotiations between the buyer and seller ensue to reach agreement on deal terms, including:
- price;
- deal structure;
- representations and warranties; and
- conditions.
This stage may involve back-and-forth counteroffers and initial agreement on a (non-binding) letter of intent or term sheet (see also question 2.1).
Due diligence: The buyer conducts the due diligence process, examining aspects such as the target's:
- finances;
- legal matters;
- operations;
- intellectual property; and
- contracts.
Signing: Once due diligence is complete, the parties negotiate and sign the definitive transaction agreements, such as:
- a share or asset purchase agreement;
- a shareholders' agreement; and/or
- other relevant contracts.
Regulatory approvals: Depending on the nature of the transaction and applicable laws, the deal may require regulatory approvals. These include:
- antitrust clearances / approval from the competition authorities;
- industry-specific permits; and
- filings with relevant government agencies or authorities.
Shareholder and board approval: The transaction may require approval from the shareholders and/or boards of directors of the buyer and seller. Specifically, shareholders' approval is a sensitive part of the transaction on the buyer's side if the buyer needs to conduct an ordinary share capital increase either:
- to fund the purchase price in cash; or
- to issue new shares being part of the purchase price (ie, in a mixed cash and stock offer to the seller).
As Swiss law requires a two-thirds majority of the votes represented (and a simple majority of the nominal value of the shares represented) for an ordinary capital increase, a few transactions have been successfully impeded by minority shareholders in the past.
Financing and funding: The buyer secures financing and determines the funding structure for the transaction. This may involve:
- utilising cash reserves;
- borrowing funds;
- issuing securities; or
- seeking external investors or lenders.
Closing: Once all conditions precedent have been satisfied, the parties proceed to closing. Closing typically involves:
- the execution of final documents;
- the transfer of shares or assets; and
- other administrative and legal formalities.

8.2 What documents are typically signed on closing? How does this typically take place?

The documents signed on closing mainly depend on:

the type of assets transferred (for the transfer of shares, see question 8.3 in detail; for asset deals, see question 1.2); and
further documentation agreed by the parties.

A resolution of the board of directors authorising the transaction and approving the buyer as the new shareholder is often executed and delivered at closing. Also, shareholders' agreements are typically signed at closing.

In-person closings are still quite common in Switzerland, especially for:

complex transactions; and
those involving small and medium-sized companies.

8.3 In case of a share deal, what is the process for transferring title to shares to the buyer?

Depending on the type and form of the shares issued, the transfer takes place by way of:

a written assignment declaration;
an endorsement on the share certificates;
the handover of the share certificates to the acquirer;
the instruction of the custodian of intermediated securities; and/or
a transfer in accordance with the registration agreement for ledger-based securities.

For registered shares, the board of directors of the target must:

approve the share transfer; and
register the acquirer in the share register of the company.

The transfer of shares in a limited liability company may be subject to additional conditions, such as the approval of the shareholders and/or the board of directors.

New shareholders may need to disclose information about the beneficial owner of the acquired shares. In the case of limited liability companies, the new shareholder must be registered with the competent commercial register.

8.4 Post-closing, can the seller and/or its advisers be held liable for misleading statements, misrepresentation, omissions or similar?

For the seller, please see question 6.3. Under Swiss law, liability in case of fraud cannot be limited, irrespective of the contractual provisions agreed between the parties.

Any material prepared by advisers is usually shared with the buyer on a strict non-reliance basis (although exceptions are seen in practice – for example, for vendor due diligence reports).

8.5 What are the typical post-closing steps that need to be taken into consideration?

Following closing, the buyer initiates the integration process, merging the acquired business with its own operations. This may include:

implementing an organisational restructuring;
transitioning employees;
implementing new IT systems or processes; and
aligning the acquired business with the buyer's strategy.

Key considerations in practice include blocking periods and other tax-related limitations from pre-closing reorganisations of the seller.

9 Competition

9.1 What competition rules apply to private M&A transactions in your jurisdiction?

In terms of merger control under competition law, transactions that result in a change of control must be notified to (and are subject to approval by) the Swiss Competition Commission if either:

certain turnover thresholds are met; or
at least one of the involved companies has been – through a legally binding decision – considered as dominant in a market in Switzerland and the transaction concerns:
- that market;
- an adjacent market; or
- an upstream or downstream market.

The turnover threshold is met if, in the financial year preceding the concentration:

the parties concerned together reported a turnover of at least CHF 2 billion or a turnover in Switzerland of at least CHF 500 million; and
at least two of the parties concerned each reported a turnover in Switzerland of at least CHF 100 million.

9.2 What key concerns and considerations should participants in private M&A transactions bear in mind from a competition perspective?

Early in the process, the parties should conduct a thorough competition law assessment and a review of the merger control obligations triggered by the contemplated transaction. Although non-approval of a transaction by the Swiss Competition Commission is rare, the process is time consuming. Also, a buyer may be required to sell part of its business (or the business acquired) to meet conditions set by the Competition Commission for granting approval. In general, approval from the Competition Commission is a common condition precedent for closing.

10 Employment

10.1 What employee consultation rules apply to private M&A transactions in your jurisdiction?

Generally, M&A transactions are not subject to employee consultation or approval. As an exception to this rule, employee consultation obligations do apply where a business (or a substantial part thereof) is transferred by way of an asset deal:

Information and consultation: Swiss law requires the employer (seller) to inform and consult with employees' representatives. The employer should provide written information about:
- the transfer;
- the reasons for the transfer; and
- the potential impact on employees.
Employee representatives (or, in their absence, the employees) have the right:
- to be informed and consulted; and
- to express their views on the proposed transaction.
Although their views are considered, their consent is not legally required for the transaction to proceed.
Timing: The consultation process should take place in advance of the transaction, allowing sufficient time for meaningful engagement and consultation with employee representatives. The specific timeframe may depend on the circumstances and should enable employees to provide input and raise concerns.
Content of consultation: The employer should discuss the impact of the transaction on employees, including:
- potential changes to employment conditions and job security; and
- any proposed measures to mitigate adverse effects.
The consultation should aim to reach an agreement on any necessary measures to protect employees' interests.

10.2 What transfer rules apply to private M&A transactions in your jurisdiction?

In case of a transfer of a business (or a substantial part thereof), Swiss law provides for the automatic transfer of the respective employment contracts to the new employer (buyer), ensuring that employees' rights and obligations remain largely unaffected by the transaction. If the employee refuses the transfer, the employment relationship ends on the expiry of the statutory notice period; until then, the acquirer and the employee must perform the contract.

10.3 What other protections do employees enjoy in the case of a private M&A transaction in your jurisdiction?

If there is a collective employment contract in place for the specific sector (or company), this will set out the minimum standard for the terms of individual employment contracts (irrespective of any deviating individual agreements). Further, specific procedures apply to mass dismissals.

10.4 What is the impact of a private M&A transaction on any pension scheme of the seller?

In asset deals, the transfer of some of the employees can result in the partial liquidation of the pension scheme. In case of underfunding, the transferred employees may have to participate with their pension entitlements pro rata in the deficit. Further, the seller as employer may have to cover the underfunding of the pension scheme.

10.5 What considerations should be made to ensure there are no concerns over the potential misclassification of employee status for any employee, worker, director, contractor or consultant of the target?

Generally, the contractual and factual relationship with the target should be analysed in detail as part of the due diligence. The buyer may also request external contractors and consultants working for the target to provide written evidence from the relevant social security authorities confirming that they have duly declared and paid their social security contributions. Members of the board of directors are usually considered to be employees of the company for social security contributions purposes.

10.6 What other key concerns and considerations should participants in private M&A transactions bear in mind from an employment perspective?

For people-oriented businesses, a buyer should also look into providing a favourable employee participation programme post-closing. Although the Swiss Federal Tax Administration has issued a circular to harmonise the tax treatment of employee participation programmes, there are still significant differences in the administrative practices of the cantons.

11 Data protection

11.1 What key data protection rules apply to private M&A transactions in your jurisdiction?

M&A transactions are not generally subject to specific data protection rules. However, Switzerland has a strong data protection framework based on the Federal Act on Data Protection and the General Data Protection Regulation. Key data protection principles include the following:

Personal data must be processed lawfully.
The processing of personal data must be carried out in good faith and be proportionate.
Personal data may only be collected for a specific purpose that the data subject can recognise. Personal data may be further processed only in a manner that is compatible with this purpose.
Personal data must be destroyed or anonymised as soon as it is no longer required for the purpose of processing.
Anyone that processes personal data must:
- verify that the data is accurate; and
- take all appropriate measures to correct, delete or destroy data that is incorrect or incomplete insofar as the purpose for which it was collected or processed is concerned.
If consent is required to process personal data, such consent is valid only if given voluntarily for one or more specific instances of processing based on appropriate information.

11.2 What other key concerns and considerations should participants in private M&A transactions bear in mind from a data protection perspective?

Appropriate safeguards should be implemented if documents containing personal data (eg, from employees and clients) are transferred to third parties such as potential buyers. Such safeguards include:

data protection clauses in contracts and non-disclosure agreements; and
technical and organisational measures.

Often, personal data is redacted in the data room and the possibility to print, share and download such information is limited. Further, sharing personal data should:

be limited to what is necessary for the transaction; and
not be excessive.

12 Environment

12.1 Who bears liability for the clean-up of contaminated sites? How is liability apportioned as between the buyer and the seller in case of private M&A transactions?

In the first instance, the buyer as the new owner must take measures in relation to a contaminated site, including the pre-payment of costs needed to clean up. However, Swiss environmental law is based on the costs-by-cause principle. Hence, there may be a liability based on environmental law of the seller (or third parties) for such costs.

12.2 What other key concerns and considerations should participants in private M&A transactions bear in mind from an environmental perspective?

Due to the uncertainty attached to potential environmental risk and the high costs of cleaning up contaminated sites, parties sometimes agree on either:

a pre-closing remediation of the contamination; or
an indemnity with an escrow amount to cover these expenses.

For heavily polluted land plots, the parties occasionally may even agree on a negative purchase price. In complex cases, the buyer may ask that the seller create and transfer a building right rather than the land plot itself in order to keep the risks.

13 Tax

13.1 What taxes are payable on private M&A transactions in your jurisdiction? Do any exemptions apply?

For share deals:

the purchase price is subject to 0.15% (Swiss securities) or 0.3% (foreign securities) securities turnover duty if a securities dealer (as defined in the Swiss stamp duty acts) acts as a party or intermediary to the transaction; and
depending on the canton in which the real estate is situated, the sale of land-rich companies is subject to:
- real estate capital gains tax; and
- real estate transfer tax.

In case of an asset deal, a realised built-in gain is subject to corporate income tax. Further, the sale of the asset is generally subject to value-added tax (VAT). However, for asset transfers between Swiss VAT registered parties, treatment as the transfer of a business as a going concern usually is or must be applied with respect to the settlement of the tax liability.

13.2 What other strategies are available to participants in a private M&A transaction to minimise their tax exposure?

The parties usually obtain advance tax rulings regarding the tax consequences of the contemplated transaction. Depending on the specific transaction, common matters covered in such rulings include:

treatment of capital gains;
indirect partial liquidation;
treaty entitlement;
the amount of potential tainted reserves; and
the tax neutrality of demergers.

13.3 Is tax consolidation of corporate groups permitted in your jurisdiction? Can group companies transfer losses between each other for tax purposes?

The possibility for tax consolidation of group entities is limited to VAT groups. As there is no tax consolidation for corporate income tax purposes, tax losses cannot be transferred within the group, except by merging the respective group companies (subject to general anti-abuse considerations, especially for substantially liquidated companies).

13.4 What other key concerns and considerations should participants in private M&A transactions bear in mind from a tax perspective?

If the sellers are tax resident in Switzerland, they usually request an indemnity against income taxes resulting from the indirect partial liquidation regime. As a result, the post-closing reorganisation and integration of the target are often limited.

Further, the expected implementation of Base Erosion and Profit Shifting Pillar II as of 1 January 2024 in Switzerland will have various implications for M&A transactions. Among other things, for some transactions, the new rules will result in a substantially increased need for information about the target and its history for a thorough assessment of the tax risks.

14 Trends and predictions

14.1 How would you describe the current M&A landscape and prevailing trends in your jurisdiction? What significant deals took place in the last 12 months?

After a strong 2021 and 2022, there seems to have been temporary slowdown in M&A activity due to:

increased interest rates;
inflation;
the prevailing geopolitical situation; and
gaps between sellers' expectations and buyers' valuations of targets.

Switzerland is nonetheless an attractive M&A market due to its stable political and investment-friendly environment. In the second half of 2023 and Q1 2024, M&A activity seems to have picked up speed again.

Notable transactions in 2022/2023 included:

Partners Group's increase of its equity stake in watchmaker Breitling;
Philipp Morris' acquisition of a 93% stake in Swedish Match;
Dufry's strategic combination with Italian caterer Autogrill;
CSL Behring's successful public tender offer for Vifor Pharma; and
UBS's absorption of Credit Suisse by way of a merger (following negotiations with the Swiss government).

14.2 Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?