M&A Guide 2025: Switzerland

The Swiss M&A market started strong in early 2024, slowed in the third quarter, but picked up again by the end of the year. Switzerland’s stable economy, strong legal system, and reputation for high-quality businesses have helped to keep the market resilient.

Since mid-2022, there has been a shift from inbound to outbound transactions in the Swiss M&A market. Many Swiss companies have been looking to expand their operations abroad and diversify risk, as many domestic businesses face a relatively mature market and heightened competition. However, foreign investors still see strong opportunities in Switzerland, especially in IT services, tech startups, pharmaceuticals, and financial services. Switzerland remains attractive for investment due to its strong position in technology, favourable tax policies, and growing demand for digital transformation and cybersecurity.

While both private and public M&A deals remain of high importance, private M&A deals make up a larger share in terms of the number of deals. However, public M&A transactions tend to be larger with regard to deal volume. Overall, though, private equity activity contributes significantly to the current M&A market environment. In recent months, Bär & Karrer has seen a high interest in public-to-private (P2P) transactions.

Following the completion of the acquisition of Credit Suisse Group AG by UBS Group AG on June 12 2023, and the completion of the merger between UBS AG and Credit Suisse AG on 31 May 2024, the boards of directors of UBS Switzerland AG and Credit Suisse (Schweiz) AG approved the merger between UBS Switzerland AG and Credit Suisse (Schweiz) AG (the Swiss Bank Merger). The Swiss Bank Merger became legally effective on 1 July 2024 upon registration in the relevant commercial register.

The Swiss Bank Merger is another milestone in the complex legal entities’ integration of Credit Suisse group into UBS group following the merger between UBS Group AG and Credit Suisse Group AG, and the merger between UBS AG and Credit Suisse AG.

L’Oréal, the world leader in beauty, acquired a 10% stake in Galderma Group AG, the pure-play dermatology category leader and one of the world’s largest players in injectable aesthetics, from Sunshine SwissCo AG, Abu Dhabi Investment Authority, and Auba Investment Pte. Ltd. (a consortium led by EQT).

The Empira Group, a leading vertically integrated investment manager specialising in real estate and managing a portfolio with a gross development value of €14 billion, has joined Partners Group, one of the world’s leading private markets investment managers. As part of this transaction, Empira will operate as a specialised, independent real estate brand within Partners Group.

The Swiss M&A market experienced a strong recovery in 2024, following a significant decline in the previous year.

The recovery was marked by increased activity across multiple sectors, with a particular focus on cross-border transactions. The energy and infrastructure sectors have seen notable growth, driven by the rising demand for renewable energy and digital infrastructure assets. Additionally, inbound deals have risen, as international investors continue to be attracted by Switzerland’s stable economic environment and its ambitious sustainability goals.

Private equity firms have also been highly active, accounting for 24.1% of deals in Q1 2024, up from 20.6% in 2022. This rise is largely due to the availability of significant capital and the stabilisation of interest rates, which have improved financing predictability.

The prospects for increased deal flow in Switzerland over the next 12 months present a positive M&A landscape. Based on recent trends and current market conditions, we can expect a cautiously optimistic outlook for Swiss M&A activity.

Swiss companies have shown increased appetite for foreign acquisitions, with outbound transactions in 2023 and 2024 reaching a record high since 2013. This trend is likely to continue, driven by the strong Swiss franc making foreign acquisitions more attractive. The TMT sector remains attractive, particularly for private equity and financial investors. The ongoing need for digital transformation and AI advancements is expected to drive growth in this sector.

It therefore remains to be seen how the M&A market will continue to evolve and if new trends will develop. Overall, however, there is reason for optimism. This includes trends related to:

• Industry consolidation, M&A-driven growth, financing considerations, or other factors;

• Distressed M&A work – takeover reorganisations, bidding, post-M&A closings;

• The lingering impact of COVID on M&A-related disputes, and the use of indemnity provisions; and

• The stabilisation of interest rates.

In general, M&A practice, which has been influenced by a strong sellers’ market in recent years, is slightly shifting towards a more balanced approach. Discussions that were not possible in the past few years – for example, regarding closing conditions, purchase price adjustments, or deferred purchase price mechanisms – have become more common again.

In recent years, the relevance of financial investors on the Swiss M&A landscape has been progressively increasing. Bär & Karrer has noticed a focus on both the buy-and-build strategy, with private equity firms acquiring companies with the same or a similar business model to realise synergies and build a strategic alliance (for example, various add-on acquisitions of Farner group, a portfolio company of Waterland), and larger single deals (such as the investment in Breitling by CVC and Partners Group). Bär & Karrer expects that this trend will continue.

Shareholder activism is still moderate in Switzerland compared with other jurisdictions, with the Swiss corporate community being rather critical of such action, as it is regarded as short-term oriented.

Swiss M&A transactions revolving around companies that have their equity securities (fully or partially) listed on a Swiss exchange (in the case of non-Swiss-domiciled issuers, only if the main listing is in Switzerland) are subject to the Swiss Financial Market Infrastructure Act (FMIA; including its implementing ordinances) and the Swiss Federal Merger Act.

These pieces of legislation are mainly driven by the concept of freedom of investment, meaning that the target’s shareholders should be put in the position to make a free decision whether to accept a tender offer, without having to fear repercussion by being minoritised. Another fundamental concept implemented in these acts is the equality of a target’s shareholders and their equal treatment.

In essence, these two concepts demand a higher grade of regulation compared with private transactions. Within the framework of the FMIA, the SIX Swiss Exchange is tasked with issuing regulations regarding the admission of securities to listing and continued compliance with such obligations.

The Swiss Takeover Board (TOB) and the Swiss Financial Market Supervisory Authority (FINMA) form the controlling bodies and are responsible to enact such regulations in light of the Swiss public takeover regime. In this set-up, FINMA acts as a superior instance to the TOB, so that decisions made by the TOB may be disputed in front of FINMA and ultimately in front of the Swiss Federal Administrative Court.

Private transactions are much less regulated, as there is no specific act regulating the acquisition of a privately held company. The key legislation for private M&A is the Swiss Code of Obligations, with its general laws regarding sales law, which, in general, implements the concept of the will of the parties. The involved parties thus possess a greater flexibility to determine the applicable contractual rules. These contractual rules are driven by individual negotiations and agreements. However, certain legislation may be applicable depending on the parties involved and the nature of the transaction. This may include the Antitrust Act and the Act on the Acquisition of Real Estate by Persons Abroad (Lex Koller).

The most notable reform in recent years was the entering into force of the new Swiss corporate law as of January 1 2023. There are a variety of changes, the most notable ones being the introduction of interim dividends and the so-called capital band, which grants more flexibility on changes of a company’s capital structure. Furthermore, the reform introduced new ways to hold shareholder and board meetings, implementing lessons learnt during the pandemic and increasing the flexibility of how resolutions can be passed.

New non-financial reporting requirements and due diligence obligations related to conflict minerals and child labour entered into force in Switzerland in 2022. The Federal Council opened consultations in its meeting on June 26 2024 to continue to align the rules for sustainable corporate governance internationally. Even though these obligations and requirements currently only affect a limited number of companies in Switzerland, they still indicate a growing focus on ESG and corporate social responsibility, and show a clear trend of priorities. In the event of harmonisation with European law, thousands of companies would be obliged to report on their risks in the areas of the environment, human rights and corruption, as well as the measures taken to mitigate them.

Furthermore, the introduction of the OECD/G20 BEPS pillar two, which aims to establish a global minimum tax, is set to significantly impact tax structuring for cross-border M&A transactions. Companies are advised to carefully consider these changes when planning international deals.

At the time of writing, Switzerland is in the process of introducing a general foreign direct investment (FDI) screening mechanism. Historically, Switzerland has not had broad FDI restrictions, except in specific sectors such as banking and residential real estate. However, following the approval of the Rieder Motion in March 2020, the Swiss Federal Council was tasked with developing a legal framework for investment reviews.

On December 15 2023, the Federal Council adopted the dispatch on the Investment Screening Act. This proposed legislation aims to prevent takeovers of Swiss companies by foreign investors that could jeopardise Switzerland’s public order or security. The draft act focuses on state-controlled investors and domestic companies operating in particularly critical sectors.

The introduction of the Investment Screening Act could have significant implications for cross-border M&A activities in Switzerland. Foreign investors and Swiss companies involved in international deals should closely monitor the progress of this legislation, as it may affect the attractiveness of Switzerland as a business location and influence future M&A transactions.

In addition, in June 2024, the Swiss Federal Council published a preliminary draft of the revised FMIA, which adapts the FMIA to technological developments and developments in international standards and foreign legal systems. At the same time, various provisions will be simplified and made more proportionate. The revision of the law is intended to further strengthen the stability of the financial system and the competitiveness of Switzerland as a financial centre. The consultation process ended in October 2024 and the revised law is not expected to come into force before 2027 or 2028.

Generally, the regulatory landscape for most Swiss transactions is not too formalistic. Swiss law is fairly liberal, allowing the dealmakers to have a high flexibility with regard to structuring a deal.

A misconception one might have is that only the pharma sector and financial services are relevant in Switzerland. However, this is not true, as the M&A activity of SMEs (also in the industrial sector) is a key driver. Furthermore, Switzerland has been able to attract a lot of startups, not least because of its liberal regulations and high level of education.

It is rare to find a complete ownership chain for Swiss target companies that can be traced back to their incorporation. As a result, sellers intending to sell such companies should begin the process of cleaning up their title well in advance of initiating the sales process, to avoid any potential delays.

The adoption of AI, machine learning tools, and big data is on the rise in Switzerland. As digitalisation becomes more prominent, Swiss law firms are recognising the importance of incorporating these technologies into their operations to improve efficiency.

Bär & Karrer’s experience shows that these tools can be very useful, and it is therefore expected that further new instruments will be developed and that their relevance for M&A transactions will continue to increase.

In an ideal scenario, an offeror holds more than 98% of the voting rights in the target company following a public tender offer, as this allows the offeror to file for cancellation of the remaining shares in a statutory squeeze-out court procedure pursuant to the FMIA against payment of the offer price to the holders of the cancelled shares. If the offeror falls short of the 98% threshold but holds at least 90% of the voting rights, full ownership can be achieved through a squeeze-out merger pursuant to the Swiss Merger Act. However, this carries a higher litigation risk than the aforementioned FMIA procedure.

Therefore, while holding more than 50% of the voting rights will give an offeror effective control over a company, and 66⅔% of the voting rights together with the majority of the capital allows the taking of certain important resolutions that by law are subject to this higher quorum, an offeror will typically want to reach at least the 90% threshold to be able to obtain full control.

In mandatory takeover offers, minimum acceptance threshold conditions are not permissible (more on this below). A voluntary offer, however, may be conditional on a minimum acceptance threshold, though only if the threshold is not unrealistically high. Whether the TOB considers a threshold as unrealistically high depends on the circumstances of the case.

In the absence of significant holdings by the offeror in the target company before the offer, the TOB will typically not permit a condition requiring that the offeror reaches the 90% threshold. In contrast, a 66⅔% minimum acceptance threshold is generally accepted even if the offeror holds no, or only a limited number of, shares before the offer. However, in practice, the vast majority of successful public tender offers have also cleared the 90% hurdle.

Swiss law allows hostile and friendly takeover bids, but an offer that is supported by the target company’s board is more likely to be successful. In a friendly takeover, the offeror and the target company will typically enter into a transaction agreement pursuant to which the target’s board of directors agrees to recommend the offer to its shareholders subject to a ‘fiduciary out’ in the event of a superior offer. It is also customary for the target to agree in the transaction agreement not to solicit offers from third parties.

The permissibility of conditions that may be attached to a public takeover offer depends on whether the offer is voluntary or mandatory. The duty to make a mandatory offer is triggered if the offeror acquires shares in a company exceeding the threshold of 33⅓% of the voting rights or a higher threshold of up to 49% that applies pursuant to a so-called opting-up clause in the target’s articles of association (Swiss law also allows companies to opt out from the mandatory bid regime).

With respect to mandatory offers, there is only a very limited number of offer conditions that the TOB deems permissible. These include that no injunction or court order prohibiting the transaction will be issued and that necessary regulatory approvals will be granted, as well as conditions ensuring the ability of the offeror to exercise the voting rights (i.e., entry in the share register and abolishment of any transfer and/or voting restrictions).

In voluntary offers, the TOB accepts a much wider range of conditions, including minimum acceptance thresholds (see above), ‘no MAC’ (material adverse change) conditions, and conditions protecting the offeror against disposals and distributions by the target.

As the valuations are lower and it is more challenging to obtain financing, there is a growing interest in P2P transactions.

Generally, break fees are deemed acceptable if they serve to compensate the offeror for potential costs associated with a failed transaction. However, break fees that are excessive and restrictive, and that may hinder shareholders’ freedom to accept or reject an offer or discourage competing bids, could be considered invalid. It is important to note that there is no clear-cut answer in Swiss legal doctrine or case law on this matter.

In contrast to the US and Asia, locked-box pricing mechanisms are commonly used and considered acceptable in Switzerland. This is especially true in the current market, which is (still) favourable to sellers. To minimise balance sheet risks and avoid disputes over post-closing purchase price adjustments, sellers often prefer the use of locked-box pricing mechanisms. However, hybrid deal structures combining locked-box and closing accounts are also emerging, reflecting increasing sophistication in Swiss M&A transactions.

Additionally, due to the seller-friendly market, locked-box pricing mechanisms are often accompanied by interest payments or cash-flow participation for the period between the locked-box date and the payment of the purchase price (i.e., closing). Furthermore, buyers are more willing to accept longer periods between the locked-box accounts date and closing.

The use of warranty and indemnity (W&I) insurance in private M&A deals has increased in Switzerland in recent years. In the current sellers’ market, buyer policies are mainly seen, which can be a solution to bridge the ‘liability gap’ where a seller is prepared to give representations and warranties but wants to cap its liability at a level that the buyer is not comfortable with – the W&I insurance can increase the overall cover available for the buyer.

If the liability cannot be capped or excluded due to the lack of negotiation power of the seller, seller policies are used (especially by financial sponsors) to shift the risk of potential outstanding claims to an insurer to be able to distribute the exit proceeds to the greatest extent possible to investors immediately following closing. This trend is expected to continue, also in view of the fact that more insurers from the EU are entering the Swiss market.

In today’s (still) seller-friendly market, sellers typically aim to minimise conditionality to ensure higher transaction certainty. This includes a decrease in the use of MAC clauses, which have almost disappeared, and for some sellers, the merger control assessment outcome can impact their choice of a bidder during an auction. Additionally, it is becoming more common to include ‘hell or high water’ clauses as part of the merger clearance closing condition.

When dealing with a Swiss target company, a Swiss law-governed share purchase agreement with jurisdiction in Switzerland is almost always seen, as there are clear benefits to using domestic law and a domestic forum. Furthermore, several legal matters, including the valid transfer of shares and governance provisions, cannot be subject to any other choice of law.

If a private equity or another investor shares an investment in a target with another party, the investor’s ability to exit and the exit route depend on the shareholders’ agreement terms. Typically, the most prevalent exit routes are trade sales to strategic investors or private equity firms, which include secondary buyouts.

While IPO exits on the SIX Swiss Exchange are less common, they have gained appeal in recent years.

To increase deal certainty, there is a rising tendency towards dual-track processes, especially during volatile and unpredictable markets, to maximise valuation, even though running simultaneous IPO and M&A processes is very complex.

The Swiss M&A market is expected to stay very active, driven by strong interest in high-quality assets from strategic buyers and private equity investors. With an estimated $2.1 trillion in global private equity funds available and stabilising interest rates, private equity firms are expected to play a big role, focusing on leveraged buyouts and add-on acquisitions. Switzerland’s stable economy and solid regulations will keep attracting foreign investors, especially from the EU, the US, and Asia.

The technology sector is set to lead the way in dealmaking, fuelled by growing demand for digital transformation across industries. The healthcare and life sciences sectors are also expected to grow significantly, thanks to advances in biotech and medtech, and the challenges of an ageing population worldwide.

Legal practices will adapt to new challenges and opportunities by focusing more on regulatory compliance and using innovative tools to streamline transaction processes and enhance efficiency.