Overview
Statutory and regulatory M&A framework in Switzerland
Private M&A
The regulatory environment in Switzerland to date continues to be investor-friendly for the following three main reasons: (i) limited investment restrictions (a notable exception being the Federal Law on Acquisition of Real Estate (the so-called Lex Koller), as well as the draft bill of the Investment Screening Act; see below); (ii) vast flexibility of the parties in the asset or share purchase agreement (e.g., with regard to representations and warranties, indemnities, disclosure concept, cap, etc.); and (iii) low bureaucracy. Private M&A transactions are generally not extensively regulated as there is no specific act regulating the acquisition of privately held companies. The main legal source is the Swiss Code of Obligations (CO), which provides quite a liberal framework for transactions.
The process of private M&A transactions differs substantially depending, inter alia, on the parties involved and the envisaged form of transaction. In light of the current market environment, which is characterised by more cautious buyers and a shift towards a more balanced dynamic following the recent sellers' market, structured transactions and corporate auctions along the lines described below continue to be market practice in Switzerland.
In the first stage, the seller and its advisers prepare the sale documentation and marketing materials. This is followed by a marketing phase in which the seller's financial adviser, or less often the target's executive management, initiates first contact with potential bidders. The latter are then required to execute a non-disclosure agreement to receive further information in the form of an information memorandum. Based on this, bidders may decide to make a non-binding offer, which is followed by the due diligence phase for selected bidders. In this stage of the process, in addition to data room review, usually management presentations take place and expert sessions are set up. Seller's and bidders' counsel will regularly also have a first exchange on the sell-side draft transaction documents. After binding offers are submitted and the seller enters negotiations with the chosen bidder or bidders, the parties proceed to the signing of the transaction agreements. Despite generally limited conditionality in Swiss transaction agreements in the recent sellers' market, there is usually a certain lapse of time between signing and closing to account for the necessary governmental approvals and pre-closing covenants. During this phase, the parties typically must fulfil certain obligations and follow contractually agreed rules of conduct. The technicalities of the closing itself vary depending on the form of transaction and the business of the target. For the post-closing phase, the parties may agree on certain restrictive covenants (non-competition and non-solicitation) of the seller and covenants (such as continuation of the business, direct and indirect partial liquidation tax covenants combined with a respective indemnity in case of a private individual seller) of the buyer.
Public M&A
The legal framework for public M&A transactions is significantly more regulated than for private M&A. Public takeovers by way of cash or exchange offers (or a combination thereof) are governed by the Financial Market Infrastructure Act (FMIA). The provisions of the FMIA are set out in more detail in two ordinances, the Financial Market Infrastructure Ordinance (FMIO) and the Financial Market Infrastructure Ordinance by the Financial Market Supervisory Authority (FMIO-FINMA). The Takeover Ordinance (TOO) sets out detailed rules on public takeover offers, including the boards' and qualified shareholders' obligations. Within this framework, the SIX Swiss Exchange is responsible for issuing regulations regarding the admission of securities to listing as well as the continued fulfilment of the listing requirements. In addition, certain agreements that may be entered into in connection with a public M&A transaction, such as block trade agreements, tender undertakings or shareholders' agreements, are governed by the CO. Apart from the specific Swiss public takeover rules, a few other laws apply in the context of public M&A transactions, including the Swiss Federal Merger Act, the Federal Antitrust Act and the Financial Services Act (FinSA). The latter primarily addresses the financial services industry and has, in particular, become relevant in the context of certain M&A transactions, as it sets out rules regarding the duty to publish an issuance prospectus in the case of a public offering of securities. It specifies the required content of prospectuses, bringing the requirements in line with international standards and those already applied by the SIX Swiss Exchange for listing prospectuses and replacing the outdated rules of the CO, which only required very limited disclosure. If, in the context of a public tender offer, securities are offered as consideration, this constitutes a public offering under the FinSA and generally requires the offeror to publish a FinSA-compliant prospectus.
The Swiss takeover rules only apply if either the target is domiciled in Switzerland and its shares are fully or partly listed on a Swiss stock exchange (e.g., SIX Swiss Exchange or BX Swiss) or the target is domiciled outside of Switzerland but the main listing of all or part of its shares is on a Swiss stock exchange (the Swiss Takeover Board (TOB) may waive the applicability of the Swiss regime if the takeover rules of the country of domicile also apply, provided that such rules are not in conflict with the Swiss regime and provide for equivalent shareholder protection). In principle, the Swiss takeover rules do not apply to companies whose shares are exclusively listed on a stock exchange outside of Switzerland or not listed on a stock exchange. However, the TOB has held that the Swiss takeover rules also apply to a company not listed on a stock exchange if, shortly prior to the transaction, either the shares were delisted to prevent the applicability of the takeover rules, or the target was demerged from a listed company. The Swiss takeover rules apply to both Swiss and non-Swiss bidders, irrespective of whether they are listed. The TOB is responsible for ensuring 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.
Under Swiss takeover law, a person acquiring more than 331⁄3% of the voting rights in a listed company – regardless of whether those rights are exercisable – must generally launch a mandatory public tender offer for all publicly held shares. However, Swiss law allows listed companies to opt out of the mandatory offer regime entirely or to opt up the threshold to as high as 49% of the voting rights through a corresponding provision in their articles of association. These modifications must adhere to strict transparency and approval rules, especially if introduced after listing. Several exemptions from the mandatory offer obligation exist, such as restructurings involving recapitalisations or intra-group transfers of voting rights, some of which require formal approval from the TOB.
While the framework for mandatory and voluntary offers is similar, mandatory offers are subject to stricter rules. For example, they must comply with the minimum price rule and may only be conditional upon a narrow set of conditions, such as regulatory approvals or legal injunctions. If the offer includes securities instead of cash, a cash alternative must also be provided.
Transparency and equal treatment of shareholders are core principles. Bidders must issue a prospectus containing full and truthful disclosures, including the terms of any agreements with shareholders. All shareholders must be treated equally, which is enforced through pricing rules. The "best-price rule" requires that if a higher price than the offer price is paid to any shareholder during the period running from the publication of the offer until six months after the expiry of the additional acceptance period, the bidder must offer the higher price to all shareholders. The "minimum price rule" stipulates that in mandatory and change-of-control offers, the offer price must be at least as high as the higher of (i) the 60-day volume-weighted average price (VWAP); and (ii) the highest price paid by the bidder in the 12 months preceding the offer.
Complex issues arise when major shareholders remain invested or "roll over" their shares into the bidder structure. Benefits provided to such shareholders – via options, management agreements or incentive plans – may be deemed ancillary benefits and could trigger the best-price rule. To manage this risk, bidders often commission independent valuation experts and seek pre-clearance from the TOB.
Swiss takeover law also aims at maintaining a level playing field for competing offers. Though target companies may agree not to solicit rival bids, they must retain the ability to engage with unsolicited bidders to fulfil their fiduciary duties. Any excessively restrictive deal protections or punitive break fees in transaction agreements may be deemed void. Typically, break fees are capped at around 1% of the transaction volume. Shareholders who accept a tender offer or provide a commitment to tender may withdraw if a competing offer emerges. To increase certainty, bidders often acquire substantial stakes prior to making an offer, though such acquisitions must be carefully structured to avoid being treated as conditional upon the success of the public tender offer.
Foreign investment
Currently, Swiss law provides for only very limited restrictions on foreign investment (for example, in the banking sector or in case of a purchase of residential real estate), otherwise foreign investors, financial sponsors, and sovereign wealth investors are, broadly speaking, not restricted or treated differently from domestic investors.
Pursuant to the Federal Act on the Acquisition of Real Estate by Foreigners (Lex Koller), non-Swiss buyers (i.e., non-Swiss natural persons, non-Swiss corporations or Swiss corporations controlled by such non-Swiss natural persons or corporations) 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. The acquisition of shares of a public company whose shares are listed on a Swiss stock exchange is exempted from such special permit obligation even if its main purpose is to hold or buy and sell real estate.
In the banking sector, the intended acquisition of a qualified direct or indirect participation (i.e., 10% or more of the share capital or voting rights or significant influence by other means, e.g., on a contractual basis) in a Swiss bank or securities firm as well as the reaching or crossing of further shareholding thresholds at 20%, 33% and 50% of the share capital or voting rights triggers notification duties to FINMA, both on the part of the acquiring and disposing shareholders and on the part of the bank or securities firm itself. Given that qualified shareholders must fulfil regulatory fit-and-proper requirements, the notification duty de facto has the effect of an approval requirement. If, as a result of a planned transaction, a Swiss bank or securities firm stands to become foreign controlled (i.e., where foreign qualified shareholders directly or indirectly control more than 50% of the voting rights or exercise control by other means), formal approval by FINMA in the form of a supplemental licence is required. Further requirements may apply in the context of financial groups or conglomerates subject to consolidated supervision by FINMA or a foreign-lead regulator, which may create a need for coordination with or between different authorities in the approval process.
Political aspirations to introduce wider foreign investment control in Switzerland have, however, advanced in recent years. A draft law on the screening of foreign direct investments has been published and is currently undergoing parliamentary deliberation (Investment Screening Act). The proposed regime would apply to acquisitions by foreign investors in sectors deemed critical to public order or security, regardless of whether the investor is state controlled. However, the proposed regime is expected to have a limited impact due to its narrow scope, which is focused on takeovers by foreign state-controlled investors in specific sectors such as defence, electricity, health and telecommunications. Such a bill would represent a significant shift from Switzerland's traditionally investor-friendly regulatory landscape, and it is not yet clear whether and when it will enter into force.
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Originally published by Global Legal Insights, Mergers & Acquisition 2025, 14th Edition
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.
