Our analysis does not encompass hostile takeovers, proxy-fights and acquisition of public companies, as public deals are very rare in Switzerland.
The key distinction between public and private M&A transactions in Switzerland lies in the nature of the target company and the applicable legal framework. Public M&A involves the acquisition of companies listed on a Swiss stock exchange and is typically carried out through a public tender offer. These transactions are subject to the Swiss Takeover Board (TOB) and Swiss Financial Market Supervisory Authority (FINMA) regulations, which impose strict disclosure, procedural, and fairness requirements to protect shareholders. In contrast, private M&A concerns the acquisition of privately held companies and is governed primarily by the Swiss Code of Obligation. Private M&A transactions are negotiated directly between the parties and allow for greater flexibility in structuring the transaction, with fewer regulatory obligations and a higher degree of confidentiality. While public M&A tends to involve larger and more regulated entities, private M&A transactions are more common among small to mid-sized businesses.
As public M&A transactions are very rare in Switzerland this paper only focuses on private M&A transactions.
Private M&A transactions in Switzerland usually encompass the following documents:
Note: The entrance in the share register of the target company is only declaratory and has no legal effect on the ownership of shares
Not applicable to private M&A transactions.
Not applicable to private M&A transactions.
In Switzerland, a company acquisition can be structured as either a share deal or an asset deal. The share deal is the preferred and most commonly used method. In a share deal, the main document is the SPA between the existing and new shareholders. While the target company itself is not a party to the agreement, it may be required to approve the transaction upon completion. The transaction involves the transfer of ownership of some or all of the target company’s shares.
Under the Swiss Code of Obligations, in an asset deal the buyer acquires selected or all assets and liabilities directly from the target company. The main legal instrument is an asset purchase agreement between the target company (as seller) and the buyer, which must list all assets and liabilities to be transferred individually. Completion occurs upon the transfer of ownership and other associated rights and obligations for each item. Alternatively, under the Swiss Merger Act, assets and liabilities can be transferred by filing a single transfer agreement with the commercial register, eliminating the need for multiple individual transfers. This method of transferring assets and liabilities is only permitted between companies that are registered in the commercial register.
Under the Swiss Merger Act, there are two ways in which two or more companies can merge: (i) one company can absorb the others, or (ii) the existing companies can combine to form a new legal entity. In both cases, shareholders of the absorbed or merged companies are issued with shares in the absorbing or newly formed company based on a conversion ratio determined to preserve their rights or receive cash compensation. The absorbed or merged companies cease to exist upon completion of the merger without the need for winding up or liquidation. The main legal instrument is the merger agreement, which must be approved by the boards of directors and shareholders’ meetings of all the companies involved.
The main advantage of the share deal is the simplicity with which it can be completed. The transaction involves the transfer of a certain number of shares through a single, straightforward and well-regulated procedure. The target company itself, including its assets and liabilities, remains unaffected by the transaction. While this comprehensive approach facilitates completion, it also increases the risk of unintended consequences, as the buyer assumes all of the target’s existing liabilities, whether known or unknown, as well as all of its assets in their current state. In some cases, the due diligence required to identify and mitigate these risks may offset the benefit of the simplified procedure.
By contrast, an asset deal allows the parties to precisely define which assets and liabilities are to be transferred, thereby limiting the risk of unforeseen liabilities. Any liability not explicitly transferred remains with the seller, although certain exceptions apply, particularly with regard to employment contracts and VAT obligations. Another advantage of an asset deal is that the parties can agree to transfer only a specific part of the seller’s business. However, this flexibility comes at the cost of increased complexity, since each asset and liability must be transferred individually. This can be especially burdensome where specific formal requirements apply, such as approval requirements for the assignment of contracts. Although the procedure under the Swiss Merger Act can reduce this burden by enabling a collective transfer through a single filing, it requires the public disclosure of the transaction’s key terms, which is often commercially undesirable.
Common Structures
In Swiss M&A practice, the most commonly used pricing mechanisms are the locked-box and closing accounts mechanisms. Hybrid models that combine elements of both are also occasionally used.
The locked-box mechanism is based on a fixed purchase price agreed upon by signing the SPA. Except in the case of agreed ‘leakages’, no purchase price adjustments or true-ups are made between signing and closing. Therefore, any fluctuations in the target companies’ actual cash, debt or working capital during this period do not affect the fixed purchase price.
The purchase price is calculated based on recent historical financial statements, referred to as ‘locked-box’ accounts, which define the agreed ‘locked-box’ date. These are usually the most recent audited year-end or reviewed interim financial statements. While the parties are free to agree on any date, locked-box accounts that are older than three to six months should generally be avoided.
Consequently, the levels of cash, debt and working capital at the locked-box date are fixed and known to the parties at signing, thereby enhancing price certainty and reducing post-closing disputes.
In the closing accounts mechanism, the parties agree at the signing only on the enterprise value and some key parameters of the enterprise value to equity value bridge. Following the completion of the transaction, financial statements as at the closing date are prepared, known as ‘closing accounts’. Based on these, the enterprise value is adjusted to reflect changes in the agreed parameters as of the closing date, thereby determining the purchase price due to the seller.
In a closing accounts structure, the SPA typically provides for a preliminary purchase price, calculated either on the basis of financial statements prepared prior to signing, or on certain projections of the target company’s financial statements as at the closing date. If the adjustment is limited to cash, debt or net working capital, the purchase price is finalized by reference to the actual relevant financial parameters as at the closing date.
The financial parameters most often considered for calculating the post-closing purchase price adjustment are cash and cash equivalents, financial debt (i.e. net cash or net debt) and trade receivables, inventories, and trade payables (i.e. net working capital). Less common are adjustments for changes in net assets (i.e. total assets minus total liabilities). However, the parties are free to select any other financial parameters they deem appropriate for determining the final purchase price, such as turnover, EBITDA or net profit. Similarly, they are free to agree on their preferred reference date for such financial parameters, with the closing date being the most common choice.
Earn-Out
In Switzerland, earn-outs are common in small-to-mid-sized transactions, but less frequent in larger deals. The relevant performance indicators can be defined by the parties, and can be either financial, such as revenue, EBITDA, EBIT, net income or operating cash flow, or non-financial, such as product development, regulatory approvals, order volume or customer acquisition. The performance period usually lasts between one and three years after closing.
Earn-outs are particularly useful when the buyer and seller have different expectations regarding the target companies’ future performance, despite thorough due diligence. They help to bridge valuation gaps and align the seller’s interests with the future success of the business. In some cases, earn-outs are combined with the deferred sale of a portion of the seller’s equity, enabling the seller to retain an economic interest in, and influence over, the business after the sale.
Earn-outs are usually capped. Payments are usually made in cash, but other forms of consideration, such as shares in the buyer or target company, may also be agreed.
In Switzerland, mergers and acquisitions are subject to merger control under the Swiss Cartel Act if certain turnover thresholds are met. Notification is mandatory if: (i) the parties involved generated a global turnover of at least CHF 2 billion, or a Swiss turnover of at least CHF 500 million, in the preceding financial year; and (ii) at least two of the parties achieved a Swiss turnover of at least CHF 100 million. Additionally, irrespective of these thresholds, a filing is required if one of the parties has previously been found by a final decision to hold a dominant position in a relevant market in Switzerland and the transaction concerns that market or a related upstream, downstream, or neighboring market.
The transaction subject to merger control must be notified to, and approved by, the Swiss Competition Commission (WEKO) before completion.
Furthermore, mergers and acquisitions within specific industry sectors, such as banking, insurance and telecommunications, require notification or approval from specialized Swiss authorities, such as the Swiss Financial Market Supervisory Authority (FINMA).
Material Adverse Change (MAC)
Material Adverse Change (MAC) clauses are recognized and enforceable under Swiss law. However, their use has declined in recent years due to market conditions favoring sellers and the emphasis on transactional certainty.
MAC clauses are typically found in larger private M&A transactions, particularly when the buyer is unwilling to take on risk before closing. Such clauses are less frequent in smaller M&A transactions, reflecting market resistance and the Swiss legal principle that, unless agreed otherwise, the purchaser assumes transaction risk upon signing.
Where used, MAC clauses generally appear as either a closing condition requiring the absence of a MAC event between signing and closing, or a seller representation combined with a condition that the representations remain accurate at closing. In either case, the buyer may terminate the agreement if a MAC event occurs.
The definition of a MAC event is often the subject of intense negotiation. Buyers seek broad definitions, while sellers aim to exclude general economic downturns, industry-wide changes, currency fluctuations, and changes in law. The term ‘material’ is rarely defined, leaving scope for interpretation, which is sometimes intentional in order to preserve negotiating flexibility in the event of a dispute.
Break-up Fees
Break-up fees are permitted but are not typically used in private M&A transactions in Switzerland as contractual remedies are generally considered sufficient to address breaches. However, the parties to a private M&A transaction may agree on a break fee in the binding part of a term sheet or in another similar agreement. The break-up fee can be structured as a penalty, liquidated damages or consideration (e.g. for exclusivity). Under Swiss law, penalties must not be excessive and may be reduced at the court’s discretion.
In Swiss M&A transactions, knowledge and materiality qualifiers are used, but they generally play a less prominent role than in common law jurisdictions. As Swiss law does not provide statutory definitions, these concepts must be defined contractually.
Materiality qualifiers help limit the seller’s liability to significant breaches. While buyers generally seek minimal or no thresholds to maximize protection, sellers typically negotiate for clearly defined materiality levels or financial thresholds (e.g., baskets or caps) to exclude immaterial issues.
According to Swiss practice, the term “knowledge” without further specification generally refers to the actual knowledge of the seller. Buyers may seek to expand this to “best knowledge,” which includes what the seller should have known after reasonable inquiry. Sellers often voice opposition to this broader formulation because it increases their liability for unknown risks.
Although Swiss law does not explicitly define ‘bring-down provisions,’ the term typically refers to contractual clauses designed to ensure that specific conditions remain satisfied and are periodically verified throughout the duration of the agreement. These clauses often include enforcement mechanisms, such as penalties, for non-compliance. In addition ‘bring-down provisions’ are standard in the context of W&I insurance.
According to Swiss law, the seller is not liable for defects that were known to the buyer at the time of purchase. The seller is also not liable for defects that a reasonably attentive buyer ought to have discovered, unless the seller expressly represented that such defects did not exist. These statutory provisions are dispositive and can be excluded through contractual agreement. In Swiss M&A transactions it is standard practice to apply the principle of fair disclosure. This means that a seller is not liable for any fact or circumstance that was fairly disclosed to the buyer. Therefore, sandbagging provisions are highly atypical in the context of private M&A transactions in Switzerland.
In Swiss M&A transactions, the SPA is typically structured so that ownership of the shares is transferred concurrently with the payment of the purchase price at closing. In the event that the closing cannot be fully completed, the parties agree to make their best efforts to undo any closing actions already taken, including the share transfer and payment of the purchase price.
A common method to ensure the prompt settlement of indemnities or claims arising from breaches of representations and warranties is to establish an escrow account. A portion of the purchase price is held by an independent escrow agent for a predetermined period.
In the event that no claims are made within the agreed timeframe, the escrowed funds are released to the seller. The escrow agent is not a signatory to the SPA and does not assume liability for the underlying claims. Accordingly, the escrow agent generally does not participate in any legal proceedings between buyer and seller concerning the existence or amount of a claim.
To mitigate risks, escrow agreements generally stipulate that the escrow agent may release the funds only upon receipt of a final court decision or arbitral award confirming the validity and amount of the claim, or upon mutual agreement of the parties. This measure is designed to prevent either party from accessing the escrowed funds individually.
In some cases, alternative forms of security, such as parent company guarantees, personal undertakings, or bank guarantees may be agreed upon.
Standard Swiss SPAs generally incorporate a comprehensive set of representations and warranties concerning general (unidentified) risks. These documents typically encompass key areas such as corporate authority and existence, title to shares, shareholder loans, financial statements, conduct of business, material contracts, employment and social security matters, real estate, tangible and intangible assets, environmental compliance, intellectual property, compliance with law, litigation, insurance, and tax. Sellers frequently seek to limit these representations and warranties to the extent possible and sometimes even require the buyer to obtain a warranty and indemnity insurance policy (W&I Insurance).
In addition to representations and warranties, sellers frequently provide specific indemnities for particular risks, which have been identified during due diligence. These specific indemnities are often structured to function as guarantees, obliging the seller to fully compensate the buyer for all damages, regardless of fault.
W&I Insurance are widely used in larger Swiss M&A transactions. Such policies are typically conditional to satisfactory due diligence and may help bridge negotiation gaps between buyer and seller. In the context of auction processes, bidders who offer W&I coverage are often viewed favorably by sellers, potentially enhancing their likelihood of success.
Claims resulting from misrepresentations or breaches of warranty are usually subject to several negotiated limitations. In contrast Specific indemnity provisions in Swiss SPAs are (as mentioned above) generally payable without limitations and are due regardless of the seller’s fault.
Caps on Seller’s Liability
It is standard practice to include a cap on the seller’s liability at a fixed amount. Usually such caps range between 20% and 60% of the purchase price for the standard representations.
De Minimis
A de minimis clause establishes a minimum threshold below which individual claims cannot be asserted. In Switzerland, the appropriate de minimis amount typically depends on the purchase price. The purpose of such a clause is to increase efficiency, as pursuing very small claims is often not justified given that the administrative effort may exceed the potential financial recovery.
Deductible and Threshold
In Swiss SPAs, one of the following two liability limitation mechanisms is commonly used:
Exceptions to Indemnity Limitations
Swiss SPAs generally exclude certain matters from limitations, notably breaches of fundamental representations and warranties (e.g., corporate existence, authority, capital structure), or in cases of willful misconduct or gross negligence of the seller. According to Swiss law, any contractual limitation on liability is unenforceable in cases involving fraudulent misrepresentation.
Exclusive Remedy Provisions
Exclusive remedy clauses, which aim to limit the buyer’s remedies solely to the indemnities detailed in the SPA, are standard.
In Switzerland, the primary sources of liability in M&A transactions generally pertain to tax, labor, and social security.
Beyond these common issues, no other risk categories generally arise as systemic concerns for companies as a whole. Other legal or operational risks tend to be specific to the target company and require case-by-case assessment based on the target company’s business model, history, and contractual relationships.
Statutory limitation periods are typically renegotiated and defined in the SPAs. Therefore, fundamental representations and warranties are generally subject to a 5- to 10-year limitation period, while other claims are typically limited to between 1 and 3 years.
In principle, the governing law of a SPA may be foreign. However, when the target company is based in Switzerland, it is standard practice to apply Swiss law and to choose Swiss jurisdiction. This approach offers distinct advantages, including enhanced legal certainty and alignment with the domestic legal, regulatory, and corporate framework. Furthermore, specific legal aspects, including the valid transfer of shares and governance provisions, are subject to mandatory Swiss law and cannot be governed by foreign law.
The enforceability of foreign court judgments in Switzerland is contingent on the country of origin of the decision and its categorization under the Lugano Convention or the Swiss Private International Law Act. The Lugano Convention is applicable to judgments from EU member states, Norway, and Iceland. It facilitates a streamlined recognition process, frequently eliminating the necessity for a separate procedure to declare the judgment enforceable.
For court decisions from countries not covered by the Lugano Convention, Swiss law imposes more stringent requirements. The foreign court must have proper jurisdiction, the judgment must be final and enforceable in its country of origin, and it must respect basic principles of Swiss public order. Once a foreign court decision is recognized, it is accorded the same treatment as a domestic Swiss decision and can be enforced using standard Swiss procedures.
When resolving disputes in Swiss M&A transactions, the choice between state courts and arbitration depends on key factors such as cost, duration, flexibility, confidentiality, and enforceability. It is important to note that neither option is inherently faster or cheaper. While arbitrators’ fees tend to be higher, court proceedings may incur additional costs if appeals are pursued. In both cases, the majority of expenses are accounted for by legal representation. State courts are often more cost-effective for lower-value claims because such cases tend to be simpler.
In terms of duration, arbitration proceedings generally last between 1.5 and 2.5 years, which is comparable to first-instance court cases. However, arbitration can be faster overall due to the absence of appeal stages. Parties may also agree on streamlined procedures, such as shorter deadlines or the appointment of a sole arbitrator, with the aim of improving efficiency.
Arbitration’s key strengths include its flexibility. The process can be customized to suit the specific requirements of the parties involved, including the selection of procedural language and the management of experts or witnesses. In cases involving expert determination clauses, arbitration is often preferable due to the challenges in clearly separating the roles of tribunals and experts. It also allows parties to appoint arbitrators with specific industry expertise.
Confidentiality is another notable advantage. Arbitration is a private process that differs from court proceedings in that it keeps business-related matters confidential. While arbitral tribunals have the authority to issue interim measures, enforcement of these measures remains the responsibility of the state courts. However, it should be noted that such measures can be requested from courts even while arbitration is ongoing.
A practical consideration is the burden of proof. State courts often apply stricter evidentiary standards, which can be a disadvantage for buyers who must demonstrate contract breaches or resulting damages, such as reduced company value.
Arbitral awards benefit from broad international enforceability through treaties like the New York Convention. On the other hand, appeals are extremely limited, which can be seen as either an advantage or a limitation depending on the case.
As a relatively new development, Switzerland is introducing the Zurich International Commercial Court (ZICC), a specialized chamber within the Zurich Commercial Court designed to handle international commercial disputes more efficiently. Enabled by recent changes to the Swiss Civil Procedure Code, the ZICC will allow proceedings in English. The ZICC is intended as an efficient and transparent alternative to international arbitration. It is accessible under specific conditions: (i) the parties must agree on the court’s jurisdiction, at least one party must be domiciled or have its seat abroad, the dispute must relate to the parties’ commercial activities, and (ii) the amount in dispute must be at least CHF 100’000.
Although disputes often arise from private M&A transactions, it is uncommon for these disputes to be litigated in regular courts or by arbitration. The Swiss approach for resolving disputes in private M&A transactions is generally focused on achieving settlements. However, it is subject to a careful contract-drafting process to reflect potential conflicts in the contracts during the drafting process and to agree on a dispute resolution mechanism at an early stage. Most disputes stem from consideration mechanisms, such as those related to closing accounts, provisions for consideration, and representations and warranties.
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Marcel Lüscher
Associate
Email: m.luescher@blumgrob.ch
Call: +41 58 320 00 00
Gian- Marchet Kasper
Partner
Email: g.kasper@blumgrob.ch
Call: +41 58 320 00 00
