Switzerland: Statutory And Regulatory M&A Framework In Switzerland

Last Updated: 24 March 2016
Article by Mariel Hoch and Christoph Neeracher

Most Read Contributor in Switzerland, August 2019

Overview

Statutory and regulatory M&A framework in Switzerland

The purchase and sale of corporate entities, and of their assets and liabilities, are mainly governed by the Swiss Code of Obligations (which includes corporate law and the statutory provisions on the purchase and sale of goods). In addition, the Swiss Merger Act establishes a comprehensive set of rules for corporate restructuring such as mergers and demergers.

Public takeovers by way of cash or exchange (or a combination thereof) offers are governed by the Financial Markets Infrastructure Act (FMIA), which came into force on 1 January 2016 and replaced the respective provisions in the Federal Act on Stock Exchanges and Securities Trading (SESTA) and a number of implementing ordinances. Within this framework, the SIX Swiss Exchange (SIX) is responsible for issuing regulations regarding the admission of securities to listing as well as the continued fulfilment of the listing requirements. The Federal Takeover Board (TOB) and the Swiss Financial Market Supervisory Authority (FINMA) are responsible to ensure the compliance of market participants with the Swiss takeover regime. Decisions of the TOB may be challenged before the FINMA and, finally, the Swiss Federal Administrative Court.

If a transaction exceeds a certain turnover threshold or if a restructuring has an effect on the Swiss market, the regulations of the Federal Act on Cartels and other Restraints of Competition also need to be considered. Any planned combination of businesses has to be notified to the Competition Commission (ComCo) before closing of the transaction in case certain thresholds regarding the involved parties' turnovers are met or in case one of the involved parties is dominant in a Swiss market and the concentration concerns that market, an adjacent market or a market that is up- or downstream thereof. The ComCo may prohibit a concentration or authorise it only under certain conditions and obligations. The ComCo's decision may be challenged before the Swiss Federal Administrative Court and, finally, before the Swiss Supreme Court.

Beyond, foreign buyers (i.e., foreigners, foreign corporations or Swiss corporations controlled by foreigners) need to consider the Federal Law on Acquisition of Real Estate in Switzerland by Non-Residents (the so-called Lex Koller). They have to obtain a special permit from cantonal authorities in order to purchase real property or shares in companies or businesses owning real property, unless the property is used as a permanent business establishment. On 1 July 2015, a new Swiss law entered into force with the aim to prevent money laundering and tax evasion. Among other things, the new legislation states that entities acquiring (alone or in concert with third parties) bearer or registered shares representing at least 25% of the share capital or voting rights in a non-listed Swiss stock corporation must disclose their beneficial owner to the target company. Also, each acquisition of bearer shares in a nonlisted Swiss stock corporation has to be reported to the company, regardless of the amount of acquired bearer shares.

Overview of M&A activity in 2015

After a very successful M&A market in 2014, the year 2015 started modestly with 65 transactions (-38%) and a total volume of US$ 21bn (-18%) in the first quarter. The main reason for this tendency was the Swiss National Bank's decision to discontinue the minimum exchange rate of CHF 1.20 per EUR1 which took the markets by surprise. The resulting strength of the Swiss Franc was an important factor for a decrease in business creations, an increase in bankruptcies and a lack of interest for Swiss targets.2 With 130 deals (-32.6%) and a transaction volume of US$ 25.8bn (-77.2%), the first six months ranged clearly behind the strong period of the previous year, also due to the lack of mega deals.3 With 56 transactions and a total volume of US$ 36bn, the third quarter of 2015 developed moderately as well.4 Overall, there was significantly less M&A activity in Switzerland in 2015 than in previous years: compared to 2014, the number of transactions decreased by 17% (from 420 to 350 transactions) and the total volume of mergers and acquisitions with Swiss involvement decreased by 55% and amounted US$ 84.9bn.

Significant deals and highlights5

Chubb Corporation / ACE Limited

The merger of Chubb and ACE to one of the leading global insurance groups, with a volume of approximately US$ 28.3bn, was the largest transaction with Swiss involvement. The US insurance company ACE bought Chubb in order to become more independent from the section 'catastrophic loss', where the profit margin decreased due to increased competition.

Novartis portfolio transformation

A highlight – both in terms of volume and complexity – was the Novartis portfolio transformation. As part of the US$ 28bn transaction:

  • Novartis acquired GlaxoSmithKline's (GSK) oncology products and divested its vaccines business (excluding flu) to GSK;
  • Novartis and GSK combined Novartis' OTC and GSK's consumer health businesses in a joint venture; and
  • Novartis divested its animal health business to EliLilly and its fl u business to CLS.

The transaction was a combination of carve-outs, share deals, ordinary asset deals as well as statutory asset deals, i.e.:

  • a straight acquisition of GSK oncology products;
  • a joint venture for the OTC business with GSK;
  • a divestiture of the vaccines business (excluding fl u) to GSK;
  • a divestiture of the fl u business to CSL; and
  • a divestiture of the animal health business to Eli Lilly.

On 31 December 2014, the divestment of the animal health business to Eli Lilly took place and on 2 March 2015, all transactions with GSK were successfully completed.

Lafarge S.A. and Holcim Ltd. / CRH Plc

Among the largest transactions in 2015, with a volume of US$ 7.2bn, was the sale of certain assets from Lafarge and Holcim to CRH.

By selling cement factories to CRH, the merger partners Lafarge and Holcim complied with conditions imposed by competition authorities.

World Duty Free S.p.A. / Dufry AG

Another notable deal was the acquisition of World Duty Free by Dufry with an overall volume of approximately US$ 4bn. With the acquisition, Dufry strengthened its position in the travel retail industry.

Guardian Financial Services Limited / Swiss Re (Admin Re UK Limited)

The acquisition of Guardian Financial Services by the Swiss Re business unit Admin Re with a volume of approximately US$ 2.4bn was also among the M&A highlights of 2015. With this transaction, Swiss Re expanded its business in the UK regarding life and health insurance and strengthened the position of the business unit Admin Re as a provider of closed life insurance portfolio.

Key developments

On 1 July 2015, a new Swiss law entered into force with the aim to prevent money laundering and tax evasion. Among other things the new legislation states that entities acquiring (alone or in concert with third parties) bearer or registered shares representing at least 25% of the share capital or voting rights in a non-listed Swiss stock corporation must disclose their beneficial owner to the target company. Also, each acquisition of bearer shares in a non-listed Swiss stock corporation has to be reported to the company, regardless of the amount of acquired bearer shares. Besides, there are new provisions in the Swiss Money Laundering Act and the Swiss Debt Enforcement and Bankruptcy Act regarding cash purchases.

The major projects of recent years to revise Swiss corporate law are still ongoing and continue to occupy market participants. One of the most prominent revisions concerns the implementation of the Federal popular initiative of March 3, 2013 against "fat cat" salaries. This led to a handful of significant changes in Swiss company law. In January 2014, the implementing ordinance against excessive compensation in listed joint stock companies entered into force, providing far-reaching new rules on the corporate governance of Swiss public companies. In particular, the ordinance prohibits severance payment and takeover premium agreements concluded with the company's executives. 'Golden parachutes' or the like may even result in criminal liability. In addition, shareholders must annually approve the aggregate amount of compensation of the members of the board of directors and the executive management. However, the rules only apply to Swiss public companies listed on a domestic or foreign stock exchange. In order to avoid the applicability of those rules, smaller listed companies may consider a delisting.

Industry sector focus

Last year's trend regarding high health-care related activity continued in the first quarter of 2015, where 30% of the ten biggest deals took place in the pharmaceutical industry.6 With 26% of the transactions and a dominant position in Switzerland's large transaction market, the sector of Technology, Media & Telecommunication started strong in the first quarter7 and remained the most active sector in the second quarter with 21% of all transactions.8 The Technology, Media & Telecommunication sector was the most active sector in 2015 with a total of 19% (65 transactions) of all transactions. Other sectors with a lot of activity were: Consumer Markets (17%); Industrial Markets (14%); Financial Services (11%); and Pharmaceuticals & Life Sciences (9%). In the national and international tourism sector there is and there will be ongoing M&A activity, as the tourism industry is under pressure for change, which leads to increased M&A activity. Regarding the transaction volume, the Financial Services sector has the lead with US$ 34bn, essentially by means of the transaction Chubb / ACE with a volume of US$28.3bn.9 Generally, the biggest transactions occurred in the insurance sector (e.g. Chubb / ACE; Guardian / Swiss Re).10

The year ahead

There is a two-sided picture of the corporate landscape, after the Swiss National Bank abolished the minimum exchange rate of CHF 1.20 per EUR. On the one hand, especially export-oriented companies have to fight for their market position. Their profitability figures are negatively affected by the strong Swiss Franc and liquidity problems occur. But the strong Swiss Franc also offers chances in the area of M&A; there could be more activity regarding the sale of companies with liquidity shortage and furthermore the strong Swiss Franc increases the purchase power of Swiss companies and makes potential acquisition targets in the eurozone more attractive. On the other hand, there are many companies that adapted and optimised their growth strategy and business models in 2015. These companies are ready for future acquisitions both inland and abroad. Patrik Kerler, Leader of M&A KPMG Switzerland, says: "Many Swiss companies are very well-positioned, despite all the adversities. The last year can be seen as transition period. We expect that many companies are getting ready for new strategic transactions in the following months, which will lead to an increased M&A activity in the following year."11

Many companies have a lot of cash reserves that can be used for growth and yield enhancement, especially through M&A transactions. Further, the Swiss State Secretary for Economic Affairs (SECO) published its growth forecast for the Swiss economy, predicting a positive development (1.5%).12 Due to a generally positive environment, the chances are good for more and greater M&A transactions in 2016.13 Many companies expect stable or rising M&A activity, especially regarding restructuring and realisation of new growth strategies.14

In 2016, especially sectors that are characterised by transformation (e.g. Technology, Pharmaceuticals/Biotechnology, Healthcare Providers, and Media/Telecom) are expected to have the most deal activity.15

Acknowledgment

The authors would like to acknowledge the assistance of their colleagues Christian Kunz, Joël Rohrer and Christian Moser in the preparation of this chapter.

Footnotes

1. http://www.kpmg.com/ch/de/library/mediareleases/seiten/mergersacquisitions- q1-2015.aspx.

2. http://www.o-mag.ch/Management-Support/rubrik,756,Keine-Zuspitzung-zum- Jahresende,news.htm.

3. http://www.o-mag.ch/Studien--Marktanalysen/rubrik,686,Deutlich-weniger-undschwaechere- Aktivitaeten,news.htm; http://www.ey.com/CH/de/Newsroom/Newsreleases/ EY-Medienmitteilung-Mergers-Acquisitions-Quarterly-Schweiz-Q2-2015.

4. http://www.kpmg.com/ch/de/services/advisory/transactions-restructuring/ma-group/ seiten/ma-report.aspx.

5. http://www.o-mag.ch/Studien--Marktanalysen/rubrik,686,Deutlich-wenigerund- schwaechere-Aktivitaeten,news.htm; http://www.kpmg.com/CH/de/Library/ MediaReleases/Seiten/mergers-acquisitions-modest-year-2015.aspx; http:// de.slideshare.net/KPMG_CH/clarity-on-ma.

6. http://www.kpmg.com/ch/de/library/mediareleases/seiten/mergersacquisitions- q1-2015.aspx.

7. http://www.ey.com/Publication/vwLUAssets/EY_Study_MA_Quarterly_ Q1_2015/$FILE/EY-Mergers-Acquisitions-Quarterly-Switzerland-First-quarter-2015.pdf.

8. http://www.ey.com/Publication/vwLUAssets/EY_Study_MA_Quarterly_ Q2_2015/$FILE/EY-MA-Quarterly-Switzerland-Q2-2015.pdf.

9. http://www.kpmg.com/CH/de/Library/MediaReleases/Seiten/mergers-acquisitionsmodest- year-2015.aspx; http://de.slideshare.net/KPMG_CH/clarity-on-ma.

10. http://de.slideshare.net/KPMG_CH/clarity-on-ma.

11. http://www.kpmg.com/CH/de/Library/MediaReleases/Seiten/mergers-acquisitionsmodest- year-2015.aspx; http://www.cash.ch/news/alle/schweiz_hat_bei_ uebernahmen_aufholpotenzial-3407625-448; http://www.o-mag.ch/Studien-- Marktanalysen/rubrik,686,Deutlich-weniger-und-schwaechere-Aktivitaeten,news.htm.

12. http://de.slideshare.net/KPMG_CH/clarity-on-ma.

13. http://www.kpmg.com/CH/de/Library/MediaReleases/Seiten/mergers-acquisitionsmodest- year-2015.aspx.

14. http://www.ey.com/CH/de/Newsroom/News-releases/EY-Medienmitteilung-Captial-Confidence-Barometer-Schweiz-2015.

15. http://info.kpmg.us/content/dam/info/ma-survey2016/pdf/2016-ma-outlook.pdf.

Previously published by Global Legal Insights

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions