Mergers and acquisitions (M&A) transactions in Switzerland are governed primarily by the Federal Act on Mergers, Demergers, Transformations and Transfer of Assets (Merger Act) of 3 October 2003, as well as by the provisions of the Code of Obligations applicable to acquisition agreements. PBM Avocats accompanies buyers, sellers, investors and managers in all phases of an M&A transaction, from initial structuring to contractual negotiation and closing, ensuring close coordination between the legal, tax and commercial aspects in Geneva and Lausanne.
Forms of Restructuring under the Merger Act
The Merger Act governs four types of restructuring operations:
| Operation | Definition | Legal Basis |
|---|---|---|
| Merger | Two or more companies unite with universal transfer of assets and liabilities | Art. 3 et seq. Merger Act |
| Demerger | A company divides into several distinct entities (dissolution demerger or separation demerger) | Art. 29 et seq. Merger Act |
| Transformation | Change of legal form without dissolution or reconstitution (e.g. AG → GmbH) | Art. 53 et seq. Merger Act |
| Transfer of Assets | Transfer of part or all assets/liabilities to another entity | Art. 69 et seq. Merger Act |
Company Acquisitions: Share Deal vs Asset Deal
Two main methods are available to the acquirer to take over a business:
- Share deal: acquisition of the shares or units of the target company. The acquirer becomes the owner of the entire company, with its assets AND liabilities. Fiscally advantageous for the seller (no additional taxation on assets in Switzerland if the conditions for the participation exemption are met). The shareholders agreement must be reviewed.
- Asset deal: acquisition of the individual assets of the business (machinery, inventory, contracts, clientele, patents). The acquirer can choose which assets to take over and avoid hidden liabilities. May give rise to stamp duties and taxes on gains realised by the seller.
The Due Diligence Process
Legal due diligence is a pre-acquisition investigation phase aimed at identifying the legal, financial and operational risks of the target company. PBM Avocats conducts due diligences covering the following areas:
- Corporate structure and commercial register
- Commercial contracts and significant contractual commitments
- Intellectual property (patents, trademarks, copyrights)
- Real estate (title deeds, commercial leases)
- Ongoing or potential litigation
- Employment law and employment contracts of key employees
- Regulatory compliance and administrative authorisations
- Tax situation and tax risks
- Insurance and coverage
The Acquisition Agreement (Share Purchase Agreement)
The Share Purchase Agreement (SPA) or share transfer agreement is the central document of any acquisition. It must address in particular:
- Price definition: fixed price, post-closing adjustment based on a closing balance sheet, or earn-out
- Conditions precedent: obtaining regulatory approvals (COMCO, FINMA, foreign competition authorities)
- Representations and warranties: list of the seller's affirmations regarding the state of the company
- Indemnification: mechanism for compensating the acquirer in the event of warranty breach
- Caps and thresholds: limitation on the maximum indemnity amount and trigger threshold (basket)
- Post-closing non-compete: seller's commitment not to compete with the target company
Tax Aspects of M&A in Switzerland
M&A transactions have significant tax implications that must be anticipated. In a share deal, the capital gain realised by an individual shareholder on the sale of shares is in principle exempt from tax in Switzerland (private capital gain), provided the securities are not held in commercial assets. In an asset deal, gains realised are fully taxable. The use of a holding structure can optimise the tax treatment of a disposal. Coordination with our tax law team and the aspects of corporate profit taxation is systematic in our M&A mandates.
Merger Control
Mergers and acquisitions that reach certain turnover thresholds are subject to prior review by the Competition Commission (COMCO) under the Cartel Act (CartA). The Swiss thresholds are: combined turnover of all companies concerned exceeding CHF 2 billion, OR turnover realised in Switzerland exceeding CHF 500 million (art. 9 para. 1 CartA). Notification to COMCO is mandatory and the transaction may not be closed before authorisation. In the event of an international dimension, European merger control regulations may also apply.
Frequently Asked Questions about Mergers and Acquisitions in Switzerland
What is the difference between a merger by absorption and a merger by combination?
Under art. 3 para. 1 Merger Act, a merger by absorption occurs when a company takes over one or more other companies, which are dissolved without liquidation and whose rights and obligations are transferred by universal succession to the acquiring company. A merger by combination (art. 3 para. 1 lit. b Merger Act) involves the creation of a new company which takes over all the rights and obligations of all merging companies, which are dissolved. In both cases, shareholders of the absorbed companies receive in exchange shares or units in the surviving or new company.
Is due diligence mandatory when acquiring a Swiss company?
No, it is not imposed by law. However, it is indispensable in practice. In the absence of due diligence, the acquirer risks not discovering hidden liabilities, ongoing litigation, environmental problems, contractual obligations binding the company or tax irregularities. Legally, an acquirer who has waived due diligence can hardly invoke a breach of the seller's warranties for matters that an ordinary examination would have revealed (imputed knowledge). PBM Avocats conducts comprehensive legal due diligences for its acquiring clients.
What is an earn-out clause in an acquisition agreement?
An earn-out clause provides that part of the acquisition price is deferred and conditional upon the future performance of the target company, generally measured on the basis of financial criteria (revenue, EBITDA) over a post-acquisition period of 1 to 3 years. This mechanism reduces the acquirer's risk and aligns the interests of the seller (often retained in management) with the success of the integration. The precise drafting of calculation and control mechanisms is crucial to avoid subsequent disputes.
What are the rights of minority shareholders in a merger?
The Merger Act offers several protections to minority shareholders in a merger. Art. 105 Merger Act grants them the right to challenge the merger before the court if they consider that the exchange ratio is not equitable. Art. 8 Merger Act requires that the merger plan be made accessible to members for at least 30 days before the general meeting. Minority shareholders who oppose the merger may request the repurchase of their rights at their fair market value (art. 105 para. 2 Merger Act). PBM Avocats defends the interests of <a href='/en/minority-shareholder-protection-ag-gmbh/'>minority shareholders</a> in these situations.
Does the Merger Act also apply to SMEs?
Yes, the Merger Act of 3 October 2003 applies to all companies limited by shares (AG), limited liability companies (GmbH), partnerships, associations and foundations under Swiss law, without size conditions. However, the law provides for procedural simplifications for SMEs: art. 23 Merger Act allows in particular a simplified merger (without board of directors report, without auditor report, with reduced consultation period) when all members of all participating companies consent in writing.