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Mergers & Acquisitions Comparative Guide – Corporate/Commercial Law

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1 Deal structure

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

An acquisition can be structured as either a share deal or an asset deal.

The principal instrument in a share deal is a share purchase agreement between the old and the new shareholders. The target itself is not a party, but may have to approve the transaction on completion. The object of the transaction is the transfer of any or all of the shares in the target.

In an asset deal under the Code of Obligations, the buyer purchases all or certain assets and liabilities from the target. The main instrument is a business purchase agreement between the target and the buyer. The agreement must individually identify all assets and liabilities to be transferred. Completion is achieved by transferring ownership and other rights and obligations relating to each asset and liability. In an asset deal under the Mergers Act, the transfer of assets and liabilities can be achieved through a single application filed with the Registry of Commerce, rather than through a series of individual transfers.

Under the Mergers Act, the merger of two or more companies can be achieved in one of two ways:

  • One company absorbs the other(s); or
  • The existing companies combine to form a new one.

In both cases, the shareholders of the absorbed or combined companies:

  • are issued shares in the absorbing or new company, applying a determined conversion rate to ensure the continuity of their rights; or
  • receive a cash consideration.

The absorbed or combined companies cease to exist upon completion, with no winding-up and liquidation required. The main instrument is a merger agreement, which requires the approval of both the board of directors and the shareholders’ assembly of all involved companies.

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

The main advantage of the share deal is the simplicity of completion. The object of the transaction is the transfer of a certain number of shares by way of a single, easy and well-regulated procedure. The target itself, and its assets and liabilities, remain unaffected. While the comprehensive nature of the share deal simplifies completion, it also increases the risk of unintended consequences: the buyer acquires all existing liabilities of the target, whether it was aware of them or not, and all assets as they are. The due diligence required to address transaction risks may offset the benefit of simple completion.

An asset deal allows the parties to agree on the transfer of specific assets and liabilities, and so limit the risk of unpleasant surprises. Any liability that is not transferred remains with the seller (exceptions apply in particular for employment contracts and value added tax obligations). Another advantage is that the parties can agree to transfer only a determined portion of the seller’s business. The need to transfer each asset and liability individually significantly increases the complexity of completion, especially when specific formal requirements apply to the transfer (eg, approval requirements for the assignment of contracts). The procedure under the Mergers Act can mitigate this inconvenience, but it requires the parties to disclose key terms of the transaction, which is often unacceptable.

The procedure under the Mergers Act is the only way to directly achieve a merger of several companies into one. It may prove cumbersome, especially for smaller transactions.

1.3 What factors commonly influence the choice of sale process/transaction structure?

Tax considerations will likely be the most important factor in any decision on the transaction structure.

Other issues to consider may include:

  • the importance of licences and permits granted to, specific contracts entered into by, or goodwill vested in the target (a share deal will not, in principle, affect any of these);
  • the intention to sell and purchase all or part of the target’s business (in the latter case, an asset deal may prove more appropriate);
  • the volume of the transaction; and
  • the attitudes and intentions of shareholders and stakeholders.

2 Initial steps

2.1 What documents are typically entered into during the initial preparatory stage of an M&A transaction?

The parties to a transaction and the target, if it is not a party, usually enter into non-disclosure agreements (NDAs). NDAs will typically be mutual and cover all information pertaining to the proposed transaction, including the fact that the parties are negotiating. Under Swiss law, NDAs are not subject to any formal requirements; but in practice, parties always execute a written document. NDA typically allow the parties to share confidential information with employees, independent advisers, affiliated companies and, in some cases, shareholders, subject to such recipients entering into NDAs themselves. As NDAs are difficult to enforce, it is not uncommon for the parties to stipulate penalties.

Based on the NDAs, the parties exchange information and negotiate the structure and the commercial terms of the transaction. Once they agree on terms, they may formalise this agreement in a written document. The terms used to describe such documents vary (eg, ‘term sheet’, ‘letter of intent’), but they all typically include:

  • a non-binding part that sets forth the principal commercial terms of the transaction; and
  • a binding part covering issues such as confidentiality, costs of negotiation, exclusivity, applicable law and jurisdiction.

In simpler transactions, the parties may forgo the term sheet and start negotiating the main contractual documents directly.

2.2 Are break fees permitted in your jurisdiction (by a buyer and/or the target)? If so, under what conditions will they generally be payable? What restrictions and other considerations should be addressed in formulating break fees?

Break fees are permitted, but subject to restrictions.

In private transactions, break fees are not very common. The parties to a transaction can commit to a break fee in the binding part of a term sheet or in a separate instrument. The fee can be structured as a penalty, liquidated damages or consideration (eg, for the right of exclusivity). Under Swiss law, penalties must not be excessive; the courts can reduce the amount of a contractual penalty at their discretion.

Break fees committed to by the target are more common in public transactions. They are permitted if they are a necessary incentive for a bidder to make an offer that is deemed to be in the interest of the target. The amount of the fee must be proportionate to the expected damage incurred by bidder in the event of a rejection of the offer (ie, it should essentially cover the bidder’s costs); and the break fee must not prejudice the shareholders’ decision to accept or reject the offer, or prevent third-party bidders from making competing offers.

2.3 What are the most commonly used methods of financing transactions in your jurisdiction (debt/equity)?

The chosen method of financing transactions depends on various factors, including:

  • the volume of the transaction;
  • the size of the companies involved;
  • the existing debt and equity structure;
  • available cash;
  • tax considerations; and
  • corporate governance.

There does not seem to be any one preferred method on the market.

If a bidder is required to make a public offer (ie, when its participation in the target exceeds, or will exceed if a public offer is accepted, 33.3% of the voting rights), it is required to offer a cash consideration, at least as an alternative to shares.

2.4 Which advisers and stakeholders should be involved in the initial preparatory stage of a transaction?

The parties to any M&A transaction should consult with legal and tax advisers to structure the transaction. Many buyers rely on a professional valuation of the target to set the price.

In the due diligence phase, accountants should be involved in any case. Other consultants – such as IP, IT, technical and sector-specific advisers – should be consulted depending on the activities of the target.

The seller of a business (asset deal) and the companies involved in a merger must inform the employees or their representation prior to completion. If measures affecting the employees are contemplated as a result of the transfer, employees or their representatives must be consulted.

2.5 Can the target in a private M&A transaction pay adviser costs or is this limited by rules against financial assistance or similar?

The guiding principle is that a Swiss company must act in its own interest, not in the interest of the shareholders. In particular, the company and shareholders must deal at arm’s length. In a share purchase, where the target is not a party and has no direct interest in the transaction, payment of adviser costs incurred by the parties would be hard to justify; exceptions may apply where the target benefits from the advisers’ services (eg, restructuring).

3 Due diligence

3.1 Are there any jurisdiction-specific points relating to the following aspects of the target that a buyer should consider when conducting due diligence on the target? (a) Commercial/corporate, (b) Financial, (c) Litigation, (d) Tax, (e) Employment, (f) Intellectual property and IT, (g) Data protection, (h) Cybersecurity and (i) Real estate.

(a) Commercial/corporate

Switzerland has recently enacted amendments to the Code of Obligations extending companies’ obligations to keep registers of shareholders and beneficial owners. Failure to comply can have serious consequences. While most companies can be expected to comply with the new rules, any potential buyer should ensure that this is the case for the target.

The Swiss Parliament has approved new reporting requirements and other obligations concerning environment, social and governance issues. We expect the new requirements will enter into force as of financial year 2022. They will primarily apply to large companies, but also to companies dealing with certain minerals and metals originating from conflict zones, or offering products and services which may reasonably be suspected to involve child labour. Although the new rules have yet to be enacted, affected targets should be able to show that they are prepared for them.

(b) Financial

Swiss companies must prepare annual financial statements, which must be approved by the shareholders. External audits are mandatory for larger companies only. Private companies are not required to publish their financial statements and very few do.

Swiss law requires companies to take measures if they have good cause to suspect over-indebtedness. Failure to comply may trigger the personal liability of the directors even if they are not responsible for the over-indebtedness. Buyers of ailing companies should ensure that all required measures are taken before completion.

(c) Litigation

There are no jurisdiction-specific due diligence issues relating to litigation. Buyers will typically ensure that they are aware of and understand the risks of all material litigation, whether ongoing or threatened.

(d) Tax

The statute of limitations for most tax obligations is 10 years. The due diligence should cover at least that period.

Other than that, there are no jurisdiction-specific due diligence issues relating to tax. Buyers typically ensure that:

  • filings and payments are in order;
  • audits have been passed successfully; and
  • potential risks are well understood and managed.

(e) Employment

In a business transfer (asset deal), employment contracts related to the target are transferred to the buyer by law. The employee may refuse to accept such transfer, but the buyer may not. Buyers should identify all employment contracts related to the target. If they do not wish to continue certain employment relationships, appropriate measures should be taken before closing; such measures may trigger an obligation to consult with employees and their representatives.

To avoid cumbersome legacy issues, buyers should ensure that the target has complied with its obligations towards social security institutions and pension funds.

Certain industries are subject to collective employment contracts which set minimum terms that apply regardless of the individual agreements by the parties.

(f) IP and IT

There are no jurisdiction-specific due diligence issues relating to IP and IT.

Buyers will typically ensure that the registration of IP rights is up to date, and that know-how is adequately protected. If IP rights are important for the business of the target and technically complex (eg, patents), the buyer should consider consulting with specialised advisers.

Similarly, buyers will ensure that the target’s rights to use crucial IT tools are adequately protected.

(g) Data protection

The main statute on data protection in Switzerland is the Federal Act on Data Protection (FADP). The FADP was recently revised and the new law is expected to enter into force in early 2022. The new law is conceptually very close to the EU General Data Protection Regulation (GDPR). It imposes a variety of new obligations on entities which control data. Although the new law is not yet in force, prudent companies should be taking appropriate measures to be ready to comply.

As a large number of Swiss companies do business in EU member states, the provisions of the GDPR may apply to them.

(h) Cybersecurity

Swiss law imposes no general obligations related to cybersecurity on businesses or companies. Ensuring adequate cybersecurity is a part of the board of directors’ duties; the required measures depend on the actual risks.

Cybersecurity as a legal issue is very much linked to data protection. The current FADP requires a data controller to take appropriate technical measures to ensure protection from breaches. The revised FDAP will specifically require technical data protection to be state of the art and commensurate to the type, volume and risk of the processed data.

Certain regulated activities – in particular, the financial industry – are subject to specific cybersecurity requirements.

(i) Real estate

The statutory restrictions on the purchase of real estate by foreigners apply to the acquisition of Swiss companies holding real estate assets. Any foreign buyer will therefore have to determine whether the target owns real estate assets and, if so, whether such assets can be held by foreigners.

The owner of a real estate asset may be liable to remove and remedy contamination of the soil or groundwater, even if such contamination was caused prior to the acquisition.

3.2 What public searches are commonly conducted as part of due diligence in your jurisdiction?

Any buyer should consult the Register of Commerce. Extracts show basic information on the corporate structure, such as:

  • the share capital;
  • the number and classes of issued shares;
  • changes in the share capital;
  • the purpose of the company;
  • current and former members of the board of directors; and
  • the auditors.

The identity of the shareholders in a company limited by shares – which is the most common type of legal entity in Switzerland – is not published in the Register of Commerce.

The local debt enforcement and bankruptcy offices at the seat of the target will provide extracts from their registers covering a period of three years.

Depending on the target and its assets, the buyer should conduct searches in the land registers and in the registers of the Swiss Institute of Intellectual Property.

3.3 Is pre-sale vendor legal due diligence common in your jurisdiction? If so, do the relevant forms typically give reliance and with what liability cap?

Pre-sale vendor due diligence is not very common in Switzerland. The tool is mainly used in auction sales (and for poorly managed targets). The purpose of vendor due diligence is primarily to provide information and the buyer cannot rely on any of the statements; reports by professional advisers usually contain disclaimers to that effect. Such disclaimers are generally valid, except in case of fraud.

4 Regulatory framework

4.1 What kinds of (sector-specific and non-sector specific) regulatory approvals must be obtained before a transaction can close in your jurisdiction?

The thresholds for general merger control under competition law are comparatively high in Switzerland. Mergers and transactions that result in a change of control require the approval of the Competition Commission if:

  • the undertakings 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 undertakings concerned each reported a turnover in Switzerland of at least CHF 100 million.

Exceptions apply for businesses that have been found to be dominant in the Swiss market in a formal procedure.

All public offers require the approval of the Takeover Board, a federal authority. The bidder must submit the prospectus to the Takeover Board either before or after publication. The Takeover Board will approve the prospectus if it complies with takeover laws and regulations.

Banks and securities dealers must notify the financial market regulator – the Financial Market Supervisory Authority (FINMA) – of M&A transactions. The creation of a new regulated entity and the transfer of control to a foreign entity require FINMA’s approval. Mergers of insurance companies and the purchase of the book of an insurance company require FINMA’s approval, as does the creation of a new insurance entity.

Approval and notification requirements also apply in the telecommunications, media and aviation industries.

4.2 Which bodies are responsible for supervising M&A activity in your jurisdiction? What powers do they have?

The Competition Commission has the power to prohibit a transaction or to allow it subject to conditions. It can impose administrative sanctions, including fines, for failure to comply with legal requirements. Concerned parties can appeal the Competition Commission’s decisions.

The Takeover Commission ensures that public offers comply with takeover laws and regulations. It publishes a formal decision which is a condition for the offer to become valid and effective. The Takeover Commission’s decisions are subject to appeal.

FINMA supervises the Takeover Commission and hears appeals against its decisions. As the financial market regulator, it can prohibit or approve certain transactions in the industry, and it can impose administrative sanctions. FINMA’s decisions are subject to appeal.

4.3 What transfer taxes apply and who typically bears them?

The main tax considerations driving M&A transactions are usually income or gains taxes, not transaction taxes.

The transfer of shares itself is not subject to tax. Stamp duties exceptionally apply where a qualified securities dealer is a party to the transaction or acts as an agent. Qualified securities dealers include banks, as well as any Swiss company holding securities valued at more than CHF 10 million as assets. The rate is 1.5‰ (for Swiss securities) or 3‰ (for foreign securities) of the consideration. The duty is borne by the securities dealer.

Value added tax applies in asset deals if any of the parties to the transaction is subject to the tax, and to the extent that goods or services are exchanged for consideration. The provider of the goods and services owes the tax, but usually recovers it from the recipient. The common rate is 7.7%.

5 Treatment of seller liability

5.1 What are customary representations and warranties? What are the consequences of breaching them?

Swiss law does not distinguish between representations and warranties. The statutory provisions on warranties and defects under a sale and purchase contract are ill suited for M&A transactions. Parties commonly opt for contractual provisions on both warranties and the consequence of breach.

Typical warranties include:

  • corporate structure;
  • existence and state of assets;
  • compliance with the law;
  • accounting and financials, including no material change since the last balance-sheet date;
  • material contracts;
  • tax compliance;
  • IP rights;
  • employees and pension funds; and
  • litigation.

The consequences of a breach typically include a right to reduce the price and/or claim indemnities. M&A contracts usually allow the buyer make claims based on the breach of warranties within a specified timeframe.

5.2 Limitations to liabilities under transaction documents (including for representations, warranties and specific indemnities) which typically apply to M&A transactions in your jurisdiction?

The seller’s liability is commonly capped at a fixed amount stated in the agreement. Special indemnities may be subject to specific caps, which may be different from the cap on general liabilities.

The seller will usually seek to limit its liability to gross negligence and fraud, excluding the liability for lesser negligence. Limitations of this nature can be agreed in addition or as an alternative to caps.

De minimis provisions are common, but are used less frequently.

Under Swiss law, no limitation of liability applies in case of fraud, regardless of the contractual provisions agreed between the parties.

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

Warranty and indemnity insurance is still a niche market in Switzerland, but parties increasingly seem to consider this option.

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

Probably the most efficient method is deferred payment of the purchase price, which can be offset against any claims of the buyer. If earn-out payments are part of the transaction, they can be offset in a similar way against claims of the buyer. These methods may or may not be implemented with an escrow arrangement.

Other common methods are parent company or shareholders’ guarantees. Bank and other third-party guarantees are usually very expensive.

5.5 Do sellers in your jurisdiction often give restrictive covenants in sale and purchase agreements? What timeframes are generally thought to be enforceable?

Restrictive covenants such as non-compete and non-solicitation clauses are common in M&A transactions in Switzerland. To be enforceable between the parties to a transaction, they must be:

  • deemed necessary to preserve that value of the target; and
  • limited in scope, time and territory.

Restrictive covenants binding the seller’s employees are valid only for employees who have actually gained knowledge of the target’s clients or know-how, and who could potentially cause significant damage to the target by using such knowledge. Restrictive covenants must be limited in scope, time and territory; they must not exceed three years, except in special circumstances.

Confidentiality clauses are common. They should be limited in time, but long periods are acceptable.

It is not uncommon for parties to stipulate penalties or liquidated damages in case of a breach of restrictive covenants.

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

Conditions to closing are common in Switzerland, particularly when closing is subject to approval by regulators, shareholders or third parties such as banks or important contracting partners of the target.

During the interval, the target is usually required to continue business as usual. Depending on the particulars of the transaction, the buyer may be granted information or approval rights.

In private transactions, MAC conditions are permitted and enforceable under Swiss law. It is not uncommon for parties to stipulate such conditions, but this should not be expected as a standard. For public transactions, refer to question 6.8.

Bring-down of warranties is not very common and is usually limited to certain specific warranties.

6 Deal process in a public M&A transaction

6.1 What is the typical timetable for an offer? What are the key milestones in this timetable?

The key steps in a public M&A transaction are as follows:

  • A pre-announcement is not mandatory, but is very common. The offer must be made within six weeks of the pre-announcement. This period may be extended if this is justified by an overriding interest.
  • The prospectus must contain all specific terms of the offer and mandatory information. Prior to publication, the bidder must submit the prospectus to a licensed auditor or securities firm for an audit. The auditor’s report is published with the prospectus.
  • The board of directors of the target must state its position in relation to the offer in a report to the shareholders. The report must be published together with the prospectus or separately.
  • The bidder must submit the prospectus to the Takeover Board either before or after publication. The Takeover Board examines the prospectus and the board of director’s report and issues a decision. Concerned parties can appeal.
  • Shareholders can accept a public offer only after a cooling-off period. This period is 10 trading days, but can be extended or shortened.
  • After the cooling-off period, the offer must remain open for 20 to 40 trading days. This period can be cut to 10 trading days if the bidder already holds a majority of the voting right in the target, and the board of directors’ report is published in the prospectus. The Takeover Board can extend this period.
  • On the first trading day after the expiry of the offer period, the bidder must announce the interim result. If the public offer has been successful, the bidder must grant an additional period of 10 days for shareholders to accept the offer. Upon the expiry of the additional period, the bidder must announce the final result.
  • Completion must occur within 10 trading days of the expiry of the additional period. The Takeover Board can grant exceptions.

6.2 Can a buyer build up a stake in the target before and/or during the transaction process? What disclosure obligations apply in this regard?

The buyer can build up a stake in the target by purchasing shares on the market. It must notify the target and the relevant stock exchange whenever its stake exceeds (or falls below) one of the following thresholds: 3%, 5%, 10%, 15%, 20%, 25%, 33.3%, 50% or 66.6% of the voting rights.

Where different entities act in concert to build up a stake, the notification duties apply to them as a group. In addition to the total holdings, they must disclose:

  • the identity of the entities acting in concert;
  • the nature of their agreement; and
  • the entity or individual representing the group.

6.3 Are there provisions for the squeeze-out of any remaining minority shareholders (and the ability for minority shareholders to ‘sell out’)? What kind of minority shareholders rights are typical in your jurisdiction?

A bidder that holds more 98% of the voting rights in the target on expiry of the offer period can apply to the court of competent jurisdiction at the seat of the target to cancel the remaining shares. The application must be made within three months of the end of the offer period. The court will cancel the shares and order the target to issue new shares to the bidder against consideration as per the offer to the remaining shareholders.

An alternative option is to merge the target with another company against a cash consideration for the shareholders. This requires the approval of 90% of the target’s shareholders, meaning that up 10% can be squeezed out in this way.

Minority shareholders typically have the right to:

  • participate and vote in shareholders’ meetings regardless of the number of shares;
  • request items on the agenda of a shareholders’ meeting if they hold shares with a nominal value of CHF 1 million;
  • request an extraordinary shareholders’ meeting if their shares represent 10% of the share capital; and
  • apply to the court to request a special audit if their shares represent 10% of the share capital.

Companies may provide for more favourable conditions for the exercise of minority rights in their articles of association.

The revised Code of Obligations, which is expected to enter into force in 2023, will strengthen minority rights.

6.4 How does a bidder demonstrate that it has committed financing for the transaction?

The bidder must show the essential details of the proposed method of financing the transaction in the prospectus. The auditor of the prospectus is specifically required to review the proposed financing and confirm that the bidder has taken the necessary measures to ensure that the required funds are available on completion. The auditor’s assessment is published with the prospectus.

6.5 What threshold/level of acceptances is required to delist a company?

Under the current law in Switzerland, no statutory thresholds or qualified majorities are required to delist a public company. The decision is within the remit of the board of directors unless the articles of association reserve the matter for decision by the shareholders’ assembly. Under the revised Code of Obligations, which is expected to enter into force in 2023, the shareholders’ assembly will have to approve delisting with qualified majorities.

Under the rules of the Swiss Stock Exchange, the regulatory board will delist securities based on a justified application by the issuer. The justification can be summary. The regulatory board must consider the legitimate interests of the trade, the investors and the company; in particular, it can grant the delisting subject to adequate announcements and timeframes. The company must provide proof of the required corporate authorisations.

Shareholders can appeal the regulatory board’s decision to allow a certain period of time between the announcement of delisting and the last day of trading. The principle of the decision to delist cannot be challenged.

6.6 Is ‘bumpitrage’ a common feature in public takeovers in your jurisdiction?

Shareholder activism, including targeting M&A transactions, has increased in recent years.

The effectiveness of bumpitrage tactics in particular is often limited by the fact that a substantial number of public companies have anchor shareholders controlling the company.

6.7 Is there any minimum level of consideration that a buyer must pay on a takeover bid (eg, by reference to shares acquired in the market or to a volume-weighted average over a period of time)?

Any shareholder, or group of shareholders acting in concert, holding 33.3% of the voting rights in a public company must offer to buy all listed equity securities in that company within two months of crossing the threshold; the company may waive that requirement or set the threshold at 49% in its articles of association. The duty to make an offer for all shares also applies when the bidder makes an offer to buy shares that will cause it to cross the threshold if the offer is accepted.

If the duty to make an offer applies, the bidder must offer a price that exceeds the higher of:

  • the 60-day volume-weighted average price per share; and
  • the highest price that it has paid for such shares in the preceding 12 months.

Furthermore, the bidder must offer proportionate prices for different classes of shares. If it acquires shares in the target after the announcement of the public offer at a higher price, it must adjust the offered price.

6.8 In public takeovers, to what extent are bidders permitted to invoke MAC conditions (whether target or market-related)?

In principle, public offers can be subject to conditions if the offer is made at the bidder’s discretion and not pursuant to a statutory requirement to make an offer. Conditions must:

  • be stated clearly in the offer;
  • serve a justified interest; and
  • not be dependent on the bidder’s will or acts.

The interest of the bidder to mitigate the risk of MACs is recognised as justified provided that the relevant changes occur in the target itself. MAC conditions should refer to clearly defined indicators (eg, sales or earnings) and quantifiable thresholds (typically a specified percentage).

6.9 Are shareholder irrevocable undertakings (to accept the takeover offer) customary in your jurisdiction?

Irrevocable undertakings by certain shareholders to accept the offer are valid and enforceable under Swiss law. Exceptions apply in the event of a competing offer.

7 Hostile bids

7.1 Are hostile bids permitted in your jurisdiction in public M&A transactions? If so, how are they typically implemented?

Hostile bids are permitted in Switzerland. The process is the same as for any public offer. A bid is considered hostile or unfriendly if:

  • the target’s board of directors recommends the rejection of the offer in its report; or
  • the board of directors reverses an earlier recommendation to accept the offer.

7.2 Must hostile bids be publicised?

The requirements for public offers (see questions 6.1 and 6.2) apply to hostile bids: the pre-announcement, the prospectus and the board of directors’ report recommending the rejection must be published. A bidder building up a stake must notify the target and the stock exchange when certain thresholds are crossed.

7.3 What defences are available to a target board against a hostile bid?

Prior to the announcement of a bid, a public company can take measures to discourage hostile takeovers. Such measures may include provisions in the articles of association that limit the voting power of any shareholder to a certain percentage, or different classes of shares with different voting rights.

Between the pre-announcement, if applicable, or publication of the offer and the announcement of the result, the board of directors of the target must not enter into any legal transactions which would have the effect of significantly altering its assets or liabilities. This includes, among other things:

  • selling or purchasing significant assets;
  • issuing new shares to dilute certain shareholders, unless the board of directors has been authorised to do so by the shareholders prior to publication of the offer; and
  • buying or selling the target’s own securities.

These restrictions do not apply to measures resolved by the shareholders’ assembly.

Any defensive measures must comply with general corporate law. In particular, they must:

  • be in the interest of the company;
  • treat shareholders equally; and
  • be reasonably justified.

Within these boundaries, the board of directors of the target may take defensive measures, including:

  • recommending the rejection of the offer in the report;
  • taking PR and lobbying measures;
  • encouraging third parties to make a competing offer (‘white knight’); and
  • negotiating with the bidder.

8 Trends and predictions

8.1 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?

The global COVID-19 pandemic seems to have had only a moderate effect on the Swiss economy. The uncertainties at the onset of the pandemic caused M&A activity to slow down, but it recovered towards the end of 2020 and in 2021.

8.2 Are any new developments anticipated in the next 12 months, including any proposed legislative reforms? In particular, are you anticipating greater levels of foreign direct investment scrutiny?

The revised Code of Obligations is expected to enter into force in 2023. The new law will in particular strengthen minority shareholders’ rights and introduce new options to structure the equity capital.

Currently, there are no general restrictions on foreign direct investment in Switzerland and there is no general requirement to obtain approval of transactions. However, the federal Parliament has requested the government to prepare legislative proposals with a view to introducing foreign investment control. The government has announced that it will present a first draft by the end of March 2022. We expect the draft to focus on strategic assets and to provide exceptions for investors from certain jurisdictions on the basis reciprocity. The issue is controversial and we consider it unlikely that any change of law will occur in the next 12 months.

Foreign investment in certain regulated markets is subject to restrictions or specific scrutiny. These include the finance, aviation, telecommunications and certain media sectors. The purchase of real estate assets by foreigners, including by way of acquiring a company that holds such assets, is subject to statutory restrictions.

9 Tips and traps

9.1 What are your top tips for smooth closing of M&A transactions and what potential sticking points would you highlight?

As anywhere in the world, it is crucial that the parties understand and agree on the key terms of the proposed transaction prior to committing substantial financial and other resources to the M&A process. Qualified advisers are indispensable.

In Switzerland, the vast majority of companies – including very valuable and globally successful ones – are small and medium-sized enterprises owned by a small number of shareholders, many of them with limited exposure to M&A. Foreign investors should anticipate a certain reluctance of otherwise sophisticated parties to deal with extensive contractual documentation inspired by common law practice, and should manage expectations. Larger companies can be expected to be familiar with international standards.

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