The Swiss M&A Bible

Material contracts, big customer agreements, financing/loan documents, leases, IT licences, often contain a change-of-control clause: if the company changes owner, the counterparty can renegotiate or terminate.

The DD team maps every material CoC clause. Where one bites, the buyer seeks a waiver or consent before closing. CoC clauses in debt are especially sensitive, they can force early repayment, so the debt is either waived or refinanced as part of the deal. Refinancing means the buyer arranges new debt at closing to repay the target's outstanding debt.

In Switzerland, employer pension liabilities (BVG/LPP "second pillar") can sit largely off the corporate balance sheet but still affect the equity bridge. Buyers diligence the underfunding status of pension foundations, it can become a real adjustment to price.

Underfunded example. EV of CHF 1,000m, net debt of CHF 200m, pension underfunding of CHF 50m. The underfunding is treated as debt-like, so equity value = 1,000m − 200m − 50m = CHF 750m.

Overfunded case. Under Swiss BVG/LPP rules, any surplus in a pension foundation belongs to plan members, not the seller. So an overfunded pension doesn't add to equity value at closing.

In a closing-accounts deal, buyer and seller agree a target working capital level (the peg) at signing. At closing, actual working capital is compared to the peg, and the price is adjusted up or down. The peg negotiation is one of the most quietly painful parts of any SPA, it's where months of operating performance get translated into a single number.

Example. EV of CHF 500m, peg of CHF 80m. If delivered working capital at closing is CHF 90m (10m above peg), the buyer pays 510m. If delivered is CHF 65m (15m below peg), the buyer pays 485m. The logic: the buyer paid for a "normal" level of WC, so any surplus or shortfall is settled in cash at closing.

During DD, the deal team often runs a Q&A call with the target's auditor to clarify accounting treatments, surface unresolved points and stress-test the financials. Before that call happens, the auditor requires the calling parties (and often the lawyers) to sign a hold harmless / non-reliance letter.

The letter says, in substance, that the calling parties acknowledge they cannot rely on anything said in the call for any legal purpose, and will not sue the auditor based on the discussion. Auditors require this to protect themselves from secondary liability for off-the-record verbal answers given outside the formal audit report.

A related but different document is the reliance letter: in some transactions, the target's auditor authorises a third party (often the buyer or its financing banks) to formally rely on the existing audit report. That sits separately and is handled by the lawyers.

On Swiss deals the structuring team, usually the buyer's tax adviser plus legal counsel, works to optimise the transaction tax-wise (e.g. acquisition vehicle, intra-group debt push-down, withholding tax). Where treatment isn't clear, an advance tax ruling with the relevant cantonal or federal tax authority gives certainty before signing.

In an SPA the seller gives warranties ("the accounts are accurate", "no undisclosed litigation"). If a warranty turns out false, the buyer can claim against the seller. W&I insurance lets an insurer take on that risk: the buyer claims against the policy, not the seller.

Why use it. The seller gets a clean exit with little or nothing tied up in escrow, very attractive to PE and in auctions. The buyer gets a solvent, neutral party to claim against, often with a longer claims window.^[12]

Mechanics. Single premium paid at completion, non-renewable. The cover is the maximum amount the insurer will pay out under the policy. Premium is typically around 1–1.7% of the cover placed.^[13] Example: CHF 50m of cover at a 1.4% premium = CHF 700k single premium at completion. Buyer-side policies are by far the most common.

What it doesn't cover. Known issues already flagged in DD, fraud, seller's non-warranty obligations (e.g. non-compete), and some category-specific risks (e.g. certain environmental or pension exposures).^[12]

When it doesn't make sense. Very small deals where the premium isn't worth it; deals without proper DD (insurers underwrite off the DD); situations with known, material issues, those go into specific indemnities, not warranties.

A Material Adverse Change (or Effect) clause lets the buyer walk if something bad enough happens between signing and closing. They're narrow, heavily negotiated, and rarely successfully invoked, but the negotiation around what counts (e.g. a 10% drop in EBITDA, a specific event) is a routine flashpoint.

A break fee is paid by the target/seller if the deal falls through (typically because the target accepts a better bid). A reverse break fee is paid by the buyer if it fails to close (often where regulatory clearance or financing falls away). Both are heavily negotiated and, on Swiss public deals, bounded by the target board's fiduciary duties.

In PE deals, target management often rolls over part of their existing equity into the new owner's structure instead of fully cashing out. The size and terms of the roll signal management's belief in the next chapter, and align incentives. Bankers model the resulting stub equity when comparing offers.

Example. A PE fund buys a CHF 100m equity ticket. The founder rolls 20% of their proceeds: they receive CHF 80m in cash plus CHF 20m of stub equity in the new HoldCo. In Swiss mid-market PE, management rollover typically sits in a 5–25% range.

Before key negotiation rounds, deal teams sometimes run a negotiation simulation: rehearsing the other side's likely positions, walk-away points and tactics, so the client goes in prepared rather than reacting live. It's preparation, not a formal process step.

If the buyer (or the combined group) has rated debt, the deal's effect on the credit rating matters. Teams engage S&P, Moody's, Fitch: often under confidentiality before announcement, to understand how the new capital structure will be viewed and whether a downgrade is likely.

Some debt documents give a short grace period to restore metrics post-deal. The financing plan is built around keeping the target rating: leverage path, dividend policy, asset sales.

Most cross-border deals trigger filings with the Swiss Competition Commission (COMCO/WEKO) and often the EU, UK, US and other national regulators. The lawyers map jurisdictions early, clearances are the most common reason a sign-to-close gap stretches from weeks into months.

For sensitive sectors (telecom, media, financial services, healthcare), sector regulators may also need to clear the change of control.

FDI screening is government review of foreign acquisitions of domestic companies in strategic sectors (defence, critical infrastructure, sensitive tech) on national-security grounds.

FDI control has moved up the agenda across Europe. Switzerland is debating a formal regime, while EU and other host-country FDI screening already applies if the buyer or target sits there. Like merger control, FDI clearances can hold up the sign-to-close period, sometimes for many months.

Especially on a public deal: who is told what and when (board, top customers, key suppliers, employees, regulators), in what order, in which languages. A botched communications plan can leak the deal early, scare key staff or trigger a customer review. Banks coordinate with the lawyers and a communications adviser.

A leak protocol is the pre-agreed plan for what to do if the deal leaks to the press before the parties are ready. It sets out who decides, what gets said, and (for a Swiss listed party) whether an early announcement is required under ad hoc publicity rules.

Insider-trading and market-manipulation rules under the FMIA are felony-level offences in Switzerland^[14], so the protocol is drafted with the lawyers up front.