1 Relevant Authorities and Legislation
1.1 What regulates M&A?
Swiss M&A transactions related to public companies are mainly governed by the Swiss Financial Market Infrastructure Act ("FMIA"; including its implementing ordinances) and the Swiss Federal Merger Act ("MA"). In addition, block trades in public M&A transactions are governed by the Swiss Code of Obligations ("CO").
The FMIA includes the Swiss public takeover rules which are enforced by the Takeover Board ("TOB"). Decisions of the TOB may be challenged before the Swiss Financial Market Supervisory Authority ("FINMA") and, finally, the Swiss Federal Administrative Court.
Apart from the specific FMIA tender offer regime, a number of other laws apply in the context of public tender offers, including the Federal Antitrust Act and the Federal Act on the Acquisition of Real Estate by Foreigners ("Lex Koller").
1.2 Are there different rules for different types of company?
The FMIA and the takeover rules only apply if: (i) the target is domiciled in Switzerland and its shares are fully or partly listed on a Swiss stock exchange; or (ii) the target is domiciled outside of Switzerland but the main listing of all or part of its shares is on a Swiss stock exchange.
In principle, the 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 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
1.3 Are there special rules for foreign buyers?
In principle, Swiss law does not set any restrictions on foreign investments.
There is, however, one important exception: pursuant to Lex Koller, foreign buyers (i.e. a foreigner, a foreign corporation or a Swiss corporation controlled by foreigners) 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. Further requirements and/or limitations exist in certain regulated sectors.
The Swiss tender offer regime applies to both Swiss and foreign bidders.
A cross-border merger of a Swiss listed company into a foreign company as the surviving entity is only permissible if the Swiss company proves that, as a result of the emigration merger, its assets and liabilities will transfer to the foreign company and the equity or membership rights of the shareholders of the Swiss company will continue to be adequately safeguarded in the foreign company. Such cross-border emigration mergers of listed Swiss companies are, in many instances, subject to negative Swiss tax consequences, and are therefore rare in practice.
1.4 Are there any special sector-related rules?
Special sector-related rules apply in regulated industries such as banking and securities trading, insurance, healthcare and pharmaceuticals, and media and telecommunications.
In general, the acquisition by a foreign acquirer of control of a company holding a banking, securities trading, insurance, healthcare, pharmaceutical or a radio or television broadcasting licence is subject to prior authorisation by the competent regulator. In most of these industries, the acquisition of minority stakes is subject to additional notification or consent requirements.
1.5 What are the principal sources of liability?
The principal sources of liability of a bidder launching a public tender offer in Switzerland are the public tender offer regime, the significant shareholding disclosure obligations and the laws penalising infringements such as insider trading and market manipulation.
Regarding the public tender offer regime, non-compliance with a number of provisions may lead to a liability of a bidder, e.g. the best price rule (see question 5.4) or the mandatory offer rules (see question 2.5). Prospectus liability may be triggered by the publication of the offer documents. Non-compliance with the significant shareholding disclosure obligations (see question 5.3) or violation of the mandatory bid obligation may also lead to a fine of up to CHF 10 million. The target company may be subject to a fine of up to CHF 500,000 if its board violates its obligations relating to its report on the offer. Under Swiss insider trading rules, any person with inside information acts unlawfully if he or she exploits such information to acquire or dispose of Swiss listed securities, communicates such information to another person without justification or exploits such information to make a recommendation to another person. Under the FMIA, price and market manipulation are also a punishable offence; more precisely, the wilful dissemination of misleading information and the execution of any buy or sale orders that give false or misleading signals in relation to listed securities.
2 Mechanics of Acquisition
2.1 What alternative means of acquisition are there?
The classic method of acquiring a Swiss public company is a public tender offer by a Swiss or foreign company for the purpose of acquiring equity capital of the target. In exchange for the target shares, the bidder can offer shares, cash, or a combination thereof.
Alternatively, control over a Swiss company may also be obtained: (i) by purchasing a controlling block of shares from the previous shareholder(s) (subject to an opting-out from the mandatory bid obligation); (ii) by acquiring a business (assets and liabilities) or by a transfer of assets according to the MA; (iii) by participating in a major share capital increase (again, subject to an exemption or opting out from the mandatory bid obligation); or (iv) by a merger. In this country chapter, only public tender offers are specifically discussed.
2.2 What advisers do the parties need?
Both the purchaser and the seller are usually accompanied by legal, financial, accounting and tax advisers, and often also communications advisers. Specialised law firms regularly draft the tender documents and liaise (in a public takeover scenario) with the TOB, while financial advisers (such as major Swiss banks and a number of specialised finance and audit firms) perform, among others, corporate services or deliver fairness opinions and other valuations.
2.3 How long does it take?
The time schedule for public M&A transactions is to a large extent regulated. Once an offer has been pre-announced, the offeror must publish the offer prospectus within six weeks. If the offeror must obtain clearances from competition or other regulatory authorities prior to the formal publication of the offer, the Takeover Board may extend the six-week period. Prior to announcing the offer, the offeror must appoint a review body to assess the offer and issue a report as to whether the offer complies with takeover law and whether financing is in place. The Takeover Board will publish its decision regarding the compliance of the offer typically on the date of publication of the prospectus. Following the publication of the offer prospectus, a cooling-off period of generally 10 trading days applies, during which a qualified shareholder may join the takeover proceedings as a party and appeal against the decision of the Takeover Board (first before the Takeover Board and, thereafter, the FINMA and the Federal Administrative Court). The main offer period typically lasts between 20 and 40 trading days and may be shortened or extended in specific situations with the consent of the Takeover Board. On the trading day following the end of the offer period, the bidder must publish the provisional interim results of the offer. The definitive interim result must be published no later than four trading days following the end of the offer period, and must specify whether the conditions of the offer have been met or waived. If the offer has been successful, the offer must be open for acceptance during an additional acceptance period of 10 trading days after publication of the definitive interim result. The final result of the offer must be published again on a provisional basis on the trading day following the end of the additional acceptance period. In its final form, it must be published no later than four trading days following the end of the additional acceptance period.
2.4 What are the main hurdles?
The main hurdles for execution of a public tender offer are: (i) the execution of a confidentiality and (typically) stand-still agreement between the potential bidder and the target company; (ii) the due diligence process; (iii) the approach of the main shareholders of the target company to purchase shares or obtain irrevocables prior to the offer; (iv) the execution of a transaction agreement between the bidder and the target company; as well as (v) the pre-announcement and publication of the prospectus (see question 2.3).
2.5 How much flexibility is there over deal terms and price?
Voluntary tender offers may be made for any securities of the target company, subject to various conditions (see question 7.1). However, in cases where a voluntary tender offer would – if successful – result in a change of control offer, i.e. the offeror passes the threshold for a mandatory offer, the offer must be extended to all listed shares of the target company and comply with the minimum and best price rules (see question 5.4). According to the mandatory offer regime, anyone who acquires more than one-third of the voting rights of a Swiss listed company is obliged to make an offer for all of the listed shares of the company, barring specific ad hoc exceptions granted by the Takeover Board. Thereby, the consideration must consist of cash or contain an all-cash alternative (see question 2.6) and the offer price must comply with the best price rule (see question 5.4). However, the target entity may have opted out of the mandatory offer regime (opting-out) or increased the threshold to up to 49 per cent of its voting rights (opting-up). Partial tender offers not aiming to exceed the mandatory offer threshold are not subject to minimum price rules but must respect the best price rule (see question 5.4).
2.6 What differences are there between offering cash and other consideration?
As consideration, an offeror may offer cash or (listed or non-listed) equity securities, or a combination thereof. If the securities offered in exchange are not listed, or if the market for such securities is deemed illiquid, a valuation must be prepared by the review body in order to allow an assessment as to whether or not the minimum price rule is adhered to (see question 2.2). In the case of an exchange offer, the prospectus includes more information about the offeror, its operations and results, as well as details about the shares offered in exchange. In mandatory offers, an all-cash alternative must always be offered. With respect to change of control offers, an all-cash alternative must be offered if the offeror has purchased at least 10 per cent of the target shares for cash during the 12-month period preceding the announcement of the exchange offer. If the offeror acquires any target shares for cash during the period between the announcement of the offer and the settlement of the offer, the offeror must provide for an all-cash alternative for all recipients of the offer. However, the all-cash alternative may be less valuable than the share offer, provided that both considerations fulfil the minimum price rule (see question 5.4). Once the offer is settled, the offeror may purchase target shares for cash within the limits of the best price rule (see question 5.4).
2.7 Do the same terms have to be offered to all shareholders?
The offeror must treat all shareholders of the target company equally. While the offer price may be fixed at the discretion of the offeror (barring, if applicable, the minimum price rule – see question 5.4), the principle of equal treatment requires that all shareholders of the target company are entitled to get the best price paid (see question 5.4). Furthermore, equal treatment extends to different classes of equity instruments in that the offer must cover all classes of listed shares of the target company with the exception of financial instruments. Prices offered for different classes of shares and financial instruments must preserve an equitable ratio. If a partial offer is made, the tendered shares must be taken into account on a pro rata basis.
2.8 Are there obligations to purchase other classes of target securities?
In the event of a mandatory offer, the offeror must make an offer for all listed securities of the target company. Thereby, all classes of listed securities must be treated equally, i.e. the prices offered for each class of shares must preserve an equitable ratio (see question 2.7).
2.9 Are there any limits on agreeing terms with employees?
According to the ordinance against excessive compensation in listed stock companies, severance payment agreements concluded with the company's board and top executives may be inadmissible and even result in criminal liability. Moreover, transaction premiums, i.e. certain commissions to board members and top executives in connection with M&A transactions, are equally regarded as illegal by law, and board and top executive compensation is subject to the shareholders' approval.
If the public tender offer is successful, selected employments may be perpetuated, provided that both the bidder and the employee agree. The main terms of such agreements must be disclosed in the target's board report related to the offer. Moreover, if the employees hold shares of the target company, the employment terms should be scrutinised to ensure that there is no hidden share premium. The best price rule (see question 5.4) is also applicable in connection with employee shares or stock option plans.
2.10 What role do employees, pension trustees and other stakeholders play?
M&A transactions are not subject to the approval of employees, pension trustees and other stakeholders. There is, however, an obligation to inform/consult employees in the case of an asset deal qualifying as business (or business unit) transfer, where employees are granted the right to refuse to be transferred to the acquirer. If they do not refuse, their employment agreements are automatically transferred to the acquirer. Should they refuse, their employments will automatically end upon lapse of the statutory notice period. Moreover, in the case of mass redundancies, the employees must also be given the opportunity to make proposals on how to avoid or minimise such consequences and, under certain circumstances, to negotiate a social plan.
2.11 What documentation is needed?
Before granting access to due diligence materials, the offeror and the target company normally conclude a confidentiality (and stand-still) agreement. Subsequently, a transaction agreement is concluded preceding the announcement of the offer. Prior to the offer, the offeror may seek irrevocable tender commitments from, or conclude share purchase agreements with, significant shareholders.
Under the Swiss takeover rules, the offeror may inform the market of its intention to launch a tender offer in a pre-announcement before the offer is actually made. This announcement must contain information about the offeror and the target company, the target equity securities, the offer price, the expected date of publication of the offer and its duration, and conditions attached to the offer. The offer prospectus contains additional information on the offeror, the financing, the offer price, the target securities and the target company. It also includes the report of the review body. In case the target's equity securities are deemed illiquid, the offeror must publish a valuation by the independent review body. In friendly takeovers, the prospectus usually includes the report on the offer of the target company's board of directors, in most cases supported by a fairness opinion by an independent provider. In hostile tender offers, this report is not included in the offer prospectus but must be published no later than 15 trading days following the publication of the offer prospectus. The interim and final results of the public tender offer must be published. All offer documents must be drafted in German and French. Non-Swiss offerors often choose to provide an English version voluntarily.
2.12 Are there any special disclosure requirements?
Specific disclosure requirements exist for both the pre-announcement and the offer prospectus (see question 2.11). Upon release of the pre-announcement, the offer prospectus must be published within six weeks, both electronically and on the bidder's webpage. In cases where the closing date of the latest financial statements of the target dates back more than six months at the end of the offer period, the target board's report on the offer must include interim financial statements. In addition, the target board must confirm that there have been no material changes in the financial situation of the company since the closing date of the last published financial statements.
The bidder must confirm in the offer prospectus that it has received no information about the target company, either directly or indirectly, from the latter that is not in the public domain and which may have a critical influence on the decision of the recipients of the offer.
2.13 What are the key costs?
A public tender offer entails fees of the review body (between CHF 70,000 and CHF 180,000, assuming no valuation is required), a fee of the Takeover Board (between CHF 25,000 and CHF 375,000), a commission per tendered share payable to the depository banks and fees payable to the provider of a fairness opinion (between CHF 150,000 and CHF 2,000,000). In addition, advisers' fees and the Swiss transfer stamp duty of 0.15 per cent will arise.
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Originally Published by ICLG
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