The Swiss Confederation is characterized by a favorable legal environment for private mergers and acquisitions. Here, the parties have complete contractual freedom to agree on the terms of the transaction. Furthermore, foreign investment in Switzerland is not subject to strict control rules. However, one should not neglect the general trend towards a more complex legal framework in relation to mergers in European countries in general. This leads to increased requirements for entrepreneurs wishing to start private M&A transactions in Switzerland and the EU.
Swiss M&A market still alive
Those planning to conduct a private M&A deal in Switzerland in 2021 should note that the local market continues to be active amid the general economic downturn and uncertainty associated with the pandemic. Registration of a private investment company in Switzerland will be quite a successful decision, as such firms continue to be an important pillar of the national M&A market. Other factors in the continued vigorous M&A activity are the small number of investment constraints combined with large investment potential. Financial sponsors have recently adopted buy and build strategies more often, with the result that buying Swiss private companies in the same or similar industries helps increase the number of deals.
Navigating the increasing complexities of merger control regimes has become increasingly important to Swiss M&A deals.
Know the beneficial owner
The main change in national corporate law, introduced at the end of last year, concerns the disclosure of information on the ultimate beneficial owner. New regulatory legal acts on the issues of financial monitoring have been developed and implemented. And if earlier, under certain conditions, it was possible not to disclose the ultimate beneficiaries, for example, in the absence of the company's "registration" activity, now we expect large-scale disclosure already within the framework of the first presentation of information. Failure to meet these obligations now entails a substantial penalty. If you are interested in starting mergers and acquisitions of private Swiss companies, please note that the general information that has to be provided includes the percentage of the share capital in the legal entity or the percentage of voting rights in the legal entity and the type of beneficial ownership (direct decisive influence or indirect decisive influence).
NOTE: The new legislation enacted will result in higher taxes for large corporations, while small and medium-sized enterprises will pay less.
Pricing Mechanism in Swiss M&A Deals
Private pricing mechanisms are widely used by individuals wishing to initiate a private M&A transaction in Switzerland. This is quite unusual for American and Asian traders looking to invest in Swiss companies. Sellers seeking to limit or mitigate the balance sheet risk of disputes over purchase price adjustments after the completion of a transaction have often been successful in promoting closed pricing mechanisms in the marketplace. Buyers tend to settle for longer periods. Conversely, elements of deferred purchase price (such as profit) or loans to suppliers have become less common in recent transactions.
Turbulences related to the Covid-19 pandemic have suspended several scheduled transactions and overall M&A activity has slowed down. Negative performance might lead to investors correcting their expectations downwards in many regions, and Europe is not an exclusion. It remains to be seen how quickly markets will recover and activity will return to pre-crisis levels. However, dealmakers who have taken time to find workable solutions have continued to close large cross-border transactions regardless. So, if you are definitely determined to pursue your intended deal in the next year, it will be successful with the right preparation.
For more information, do not hesitate to sign up for a consultation on M&A in the Swiss market from our expert. Reach out to us in a way convenient for you.