Mergers and acquisitions (M&A) transactions in Switzerland are governed primarily by the Federal Act on Mergers, Demergers, Transformations and Transfers of Assets (FMAA) 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 throughout all phases of an M&A transaction, from initial structuring to contractual negotiation and closing, ensuring close coordination between legal, tax and commercial aspects in Geneva and Lausanne.
The Forms of Restructuring Provided for by the FMAA
The FMAA governs four types of restructuring operations:
| Operation | Definition | Legal basis |
|---|---|---|
| Merger | Two or more companies combine with universal transfer of assets and liabilities | Art. 3 et seq. FMAA |
| Demerger | A company divides into several distinct entities (dissolution demerger or separation demerger) | Art. 29 et seq. FMAA |
| Transformation | Change of legal form without dissolution or reconstitution (e.g. AG → GmbH) | Art. 53 et seq. FMAA |
| Transfer of assets | Transfer of part or all of the assets/liabilities to another entity | Art. 69 et seq. FMAA |
Company Acquisitions: Share Deal vs Asset Deal
Two main methods are available to the acquirer for taking over a company:
- Share deal: acquisition of the shares or equity interests of the target company. The acquirer becomes the owner of the entire company, with all its assets AND liabilities. Fiscally advantageous for the seller (no additional tax on assets in Switzerland if the conditions for participation exemption are met). The shareholders' agreement must be reviewed.
- Asset deal: acquisition of the individual assets of the business (machinery, stock, contracts, client base, patents). The acquirer can choose the assets it takes 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 key employee contracts
- 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 case of breach of warranties
- Caps and thresholds: limitation of the maximum indemnity amount and trigger threshold (basket)
- Post-closing non-compete: seller's undertaking not to compete with the target company
Tax Aspects of M&A Transactions 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 as commercial assets. In an asset deal, gains realised are fully taxable. The use of a holding structure may allow the tax treatment of a disposal to be optimised. 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 achieved in Switzerland exceeding CHF 500 million (art. 9 para. 1 CartA). Notification to COMCO is mandatory and the transaction may not close before authorisation is granted. In the case of international dimension, EU merger regulations may also apply.
Frequently Asked Questions on Mergers and Acquisitions in Switzerland
What is the difference between an absorption merger and a combination merger?
Under art. 3 para. 1 FMAA, an absorption merger 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 combination merger (art. 3 para. 1 let. b FMAA) involves the creation of a new company that takes over all the rights and obligations of all the merging companies, which are then dissolved. In both cases, the shareholders of the absorbed companies receive shares or equity interests in the surviving or new company in exchange.
Is due diligence mandatory when acquiring a Swiss company?
No, it is not required by law. However, it is indispensable in practice. Without due diligence, the acquirer risks failing to discover hidden liabilities, ongoing litigation, environmental issues, contractual obligations binding the company or tax irregularities. From a legal perspective, an acquirer who has waived due diligence can hardly invoke a breach of the seller's warranties for matters that an ordinary verification 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. Precise drafting of the calculation and monitoring mechanisms is crucial to avoid subsequent disputes.
What are the rights of minority shareholders in a merger?
The FMAA provides several protections for minority shareholders in a merger. Art. 105 FMAA grants them the right to contest the merger before the court if they consider that the exchange ratio is not equitable. Art. 8 FMAA 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 buyout of their rights at their market value (art. 105 para. 2 FMAA). PBM Avocats defends the interests of <a href='/protection-minoritaires-sa-sarl/'>minority shareholders</a> in these situations.
Does the Merger Act also apply to SMEs?
Yes, the FMAA of 3 October 2003 applies to all stock corporations (AG/SA, GmbH/Sàrl), partnerships, associations and foundations under Swiss law, without any size condition. However, the Act provides for procedural simplifications for SMEs: art. 23 FMAA notably allows a simplified merger (without board of directors' report, without auditor's report, with reduced consultation period) when all members of all participating companies consent in writing.