The International Comparative Legal Guide To

Mergers & Acquisitions 2011

A practical cross-border insight into mergers & acquisitions
Published by Global Legal Group with contributions from: Albuquerque & Associados Arzinger Ashurst LLP Bech-Bruun Boss & Young, Attorneys at Law Brando Teixeira Sociedade de Advogados Cardenas & Cardenas Abogados Cravath, Swaine & Moore LLP Debarliev, Dameski & Kelesoska Attorneys at Law Dittmar & Indrenius Elvinger, Hoss & Prussen Eubelius Fenech Farrugia Fiott Legal Garrigues Georgiades & Pelides LLC Gide Loyrette Nouel Goltsblat BLP Guyer & Regules Herbert Smith LLP Kalo & Associates Koep & Partners Lenz & Staehelin Mannheimer Swartling Advokatbyr AB Meitar Liquornik Geva & Leshem Brandwein Nishimura & Asahi Pachiu & Associates PRA Law Offices Schoenherr Selvam LLC Skadden, Arps, Slate, Meagher & Flom LLP Slaughter and May Steenstrup Stordrange DA Stikeman Elliott LLP SZA Schilling, Zutt & Anschutz Udo Udoma & Belo-Osagie uri i Partneri law firm

Chapter 40

Switzerland
Lenz & Staehelin

Jacques Iffland

Hans-Jakob Diem

1 Relevant Authorities and Legislation

1.1 What regulates M&A?

Public takeovers by way of cash or exchange offers are governed by the Federal Act on Stock Exchanges and Securities Trading (SESTA) and its implementing ordinances. The takeover rules are implemented by the Takeover Board (TOB), whose decisions can be challenged before the Swiss Financial Market Supervisory Authority (FINMA, formerly Federal Banking Commission or FBC). The decisions of the FINMA can in turn be brought before the Swiss Federal Administrative Tribunal. The Swiss takeover rules, the decisions of the TOB and FINMA, as well as most offer documents are accessible at www.takeover.ch. Public takeovers by way of statutory mergers are governed by the Merger Act. Statutory mergers involving public companies, and, in particular, cross-border mergers, are rare in Switzerland and are not specifically addressed in this country chapter.
1.2 Are there different rules for different types of public company?

trading, insurance, media and telecommunications industries. Broadly speaking, the acquisition by a foreign acquirer of control of a company holding a banking, securities trading, insurance or a radio or television broadcasting licence is subject to prior authorisation by the competent regulator. In most of these industries, acquisition of minority stakes is subject to additional notification or consent requirements. There are restrictions on permitted foreign ownership in a number of other regulated sectors such as aviation, maritime shipping, nuclear power generation or pipeline sectors.
1.5 What are the principal sources of liability?

The principal sources of liability of a bidder launching a public takeover offer in Switzerland are the significant shareholding disclosure rules, the takeover rules and the laws regarding insider trading and market manipulation. Under the significant shareholding disclosure rules, fines may be imposed upon any person who does not notify a significant interest in a Swiss listed company (see question 5.2). The fines may amount to the double of the value of the undisclosed stake. The takeover rules contain a number of provisions that may lead to liability of a bidder, such as the mandatory offer rules (see question 2.5) or the best price rule. The takeover rules also require bidders, targets and, under certain circumstances, the targets shareholders to notify certain trades to the TOB and the relevant exchanges during the offer period, with significant fines likely to be imposed in the event of non-compliance. The publication of the offer documents may also give rise to a prospectus liability. The Swiss rules regarding insider trading are complex and often unclear. However, the consensus view is that a prospective bidder does not commit an offence if it builds up a stake ahead of an upcoming takeover offer. Also, the disclosure of a contemplated offer to potential co-investors or selected shareholders of the target are permissible if the recipients undertake to abstain from using their knowledge of the proposed transaction for trading purposes. The Criminal Code also prohibits market manipulation, in particular the wilful dissemination of misleading information, wash sales and matched orders. In addition, the Federal Supreme Court held that some form of market manipulation may be punishable as fraud.

The Swiss takeover rules apply if the target is a company with its registered office or de facto headquarters in Switzerland and has equity securities listed on a stock exchange in Switzerland. In principle, the rules do not apply: to companies whose equity securities are exclusively listed on a stock exchange outside of Switzerland; to companies whose shares are listed in Switzerland, but have their registered office and de facto headquarters abroad; or to companies that have a wide shareholder base, but are not listed on any stock exchange. However, in some cases, the TOB held the takeover rules applicable to companies whose securities were not listed or were listed abroad, where the target company had been separated from a listed company shortly prior to the transaction.
1.3 Are there special rules for foreign buyers?

The takeover rules apply irrespective of whether the bidder is a Swiss or foreign company. There are no foreign exchange control or similar laws generally restricting investments or acquisitions in Switzerland by persons or companies domiciled abroad.
1.4 Are there any special sector-related rules?

2 Mechanics of Acquisition
2.1 What alternative means of acquisition are there?

The principal regulated industries subject to governmental notification or consent requirements are the banking and securities

The predominant means of acquiring a Swiss public company is a public takeover (tender) offer. The bidder can generally offer cash,

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shares, or a combination thereof in exchange for target shares. Alternative means of acquiring Swiss companies are statutory (i.e. single-step) mergers and asset deals, which are not specifically discussed in this country chapter.

Switzerland
execution of a transaction agreement between the bidder and the target; and announcement of the offer, publication of the offer prospectus, etc. (see question 2.3 for details).
2.5 How much flexibility is there over deal terms and price?

Switzerland

2.2

What advisers do the parties need?

Shares of Swiss listed companies are generally deposited with SIX SIS AG (SIS), the Swiss central depositary organisation. The offeror will therefore need the assistance of a SIS participant (which will generally be a Swiss bank or securities dealer) to settle the transaction and disseminate the offer documents through the Swiss banking system. The bidder may, but is not required to, retain a financial adviser. The bidder must also retain a so-called review body, who will opine on the accuracy and completeness of the offer prospectus, the availability of the financing and the compliance of the offer with the takeover rules. The review body must be a securities dealer regulated by the FINMA or an auditing firm recognised by the FINMA. It must be independent from the bidder, meaning that this function cannot be assumed by the bidders advisers. The bidder will also retain a Swiss legal adviser who will, among other things, liaise with the TOB and draft the offer documents. The board of directors of the target will routinely retain its own legal and financial advisers. It may also wish, and may under certain conditions be required to, obtain a fairness opinion to support a recommendation of the transaction. The fairness opinion will have to be prepared by an independent person meeting certain qualification standards.
2.3 How long does it take?

Voluntary offers can in principle be made for any number of securities of the target (partial offers being consequently permitted), at any price, and be subject to conditions (see question 7.1). However, where a voluntary offer would, if successful, result in the bidder exceeding the threshold for a mandatory offer, the bid must extend to all listed shares (whether voting or not) of the target and comply with the minimum price rules applicable to mandatory offers. SESTA provides for a mandatory offer regime. Whoever acquires more than one third of the voting rights, whether exercisable or not, of a Swiss company whose equity securities are listed on a stock exchange in Switzerland, is required to make an offer for all the listed shares of the company. The TOB may grant ad hoc exemptions from the duty to make an offer. Issuers may also opt out of the mandatory offer regime, or increase the threshold triggering the duty to make an offer up to 49% of their voting rights (although this can in principle not be made in anticipation of a specific transaction). The price of a mandatory offer must be at least equal to the market price, being in principle the volumeweighted average of the prices paid on a Swiss stock exchange during the 60 trading days preceding the announcement of the offer, or, if higher, 75% of the highest price paid by the bidder and the persons acting in concert with it within the last twelve months. A mandatory bid must also be made for cash or contain a cash alternative and, subject to certain exceptions, be unconditional.
2.6 What differences are there between offering cash and other considerations?

Once announced, an offer must in principle be published within six weeks. The publication of an offer is followed by a cooling-off period of at least ten trading days, during which the TOB decides on the issues that may be raised by the target or shareholders representing more than 2% of the voting rights of the target. In principle, an offer must remain open for acceptance for an initial period of 20 to 40 trading days. The TOB can extend or reduce this time period under certain circumstances. In the event of a competing offer, the acceptance period is automatically extended to match the acceptance period of the competing bid. After expiration of the initial offer period, the bidder must publish the interim results of the offer. If successful, the offer must be re-opened for acceptance for an additional acceptance period of ten trading days. The bidder is required to publish the final results of the offer in the same manner as the interim results. The offer must be settled within ten trading days following expiration of the additional acceptance period, unless the TOB has agreed to the settlement being made subject to conditions and these conditions having neither been fulfilled nor waived by the date scheduled for completion.
2.4 What are the main hurdles?

The securities offered in a share-for-share bid do not need to be listed. If they are not listed or if their market is illiquid, their value has to be determined by a review body (see question 2.2). In an exchange offer, the prospectus has to include more detailed information about the bidder, its operations and results, as well as information about the shares offered in exchange. Mandatory offers must either be made for cash or contain a cash alternative.
2.7 Do the same terms have to be offered to all shareholders?

In principle, the bidder is required to treat all target shareholders equally. In particular: if the target has several classes of listed shares (whether voting or non-voting), the offer must extend to each such class; if a partial bid is over-accepted, all acceptances must be scaled down proportionally; if the offer extends to several classes of securities, a reasonable ratio must exist between the prices offered for each class; and pursuant to the so-called best price rule, a bidder must increase the offer price if it acquires equity securities of the target above that price (see question 5.3). The takeover rules, however, allow a bidder to purchase shares of the target above the offer price prior to the launch of the offer, provided such purchases are not conditional upon the success of, or otherwise linked to, the subsequent public takeover offer.

The principal milestones for execution of a public takeover offer are the following: execution of a confidentiality and stand still agreement between the potential bidder and the target; due diligence; as the case may be, approach by the bidder of the main shareholders of the target to obtain irrevocables or purchase shares prior to the offer;

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2.8 Are there any limits to agreeing on terms with employees?

Switzerland
subject to a Swiss transfer stamp duty of 1.5 and an additional levy of the SIX Swiss Exchange (SIX). If securities are being offered in exchange for the shares of the target company, an additional duty of 1.5 (3.0 if the security is issued by a foreign issuer) will be assessed, although exemptions from the Swiss transfer stamp duty may be available. Tendering shareholders brokers are generally required to pay half of these duties. However, it is customary that the bidder assumes this payment as well, at least in the context of a voluntary offer.
2.12 What consents are needed?

As opposed to statutory mergers, employees do not need to approve or be consulted on public takeover offers. The best price rule (see question 5.3) is also applicable in connection with employee shares or stock options. This may raise issues if share or option plans are amended, or shares or options are repurchased in the context of an offer. On one occasion, severance payments negotiated between the target and its executives in the context of a hostile offer were characterised as illegal defensive tactics. The bidder may in principle agree on future terms of employment with selected employees of the target in case the offer is successful. However, the target boards report in relation to the offer will have to disclose the main terms of such agreements as well as any other material, financial and other consequences that the offer will have for the target board members and senior management.
2.9 What documentation is needed?

Apart from antitrust and regulatory clearances, the TOB will have to approve the offer prospectus and the report of the target. The TOBs approval is generally applied for and obtained prior to publication of the offer documents, although the TOB may reconsider its decision if it is subsequently contested by the targets shareholders (see question 3.3). Prior approval by the TOB is typically a three-week process.
2.13 What levels of approval or acceptance are needed?

The bidder and the target normally execute a confidentiality (and stand still) agreement before the bidder is granted access to due diligence materials, and a transaction agreement before the offer is announced. The bidder may also collect tender commitments from significant shareholders or enter into share purchase agreements prior to the bid. A public takeover offer typically starts with the announcement of the offer. An announcement is a short document which sets out the main terms of the offer (scope, price, kind of consideration, timetable and conditions). The announcement must be followed, in principle within six weeks, by an offer prospectus. The board of directors of the target company must publish a report on the offer. This report is often supported by a fairness opinion prepared by an independent third party. If the offer is a recommended one, the board report is generally reproduced in the offer prospectus. The interim and final results must be published by means of a press release and commercial announcement. SESTA requires the key offer documents to be drafted in French and German. In case of discrepancies between the different versions of the offer documents, the version which is the most unfavourable to its author prevails.
2.10 Are there any special accounting procedures?

The takeover regulations do not require public takeover offers to be subject to a minimum acceptance level. An offer can consequently be declared successful, even if the bidder holds less than 50% of the targets shares upon expiration of the offer period. The launch of a public takeover offer in principle does not require any shareholder approval under Swiss law. However, in the event of an exchange offer, shareholders of the bidder may need to increase the share capital of the company to issue the shares offered in exchange. Also, if the articles of association of the target company contain defensive devices (e.g. share transfer or voting rights restrictions), the bidder will generally wish to make its bid conditional upon the shareholders of the target company abrogating these provisions.
2.14 When does cash consideration need to be available?

If successful, a public takeover offer must be settled within 10 trading days following expiration of the additional acceptance period, unless the TOB has agreed to the settlement being made subject to conditions (see question 7.1) and these conditions have neither been fulfilled nor waived by the date scheduled for completion. The cash consideration must be available at the settlement date. However, the offeror must establish at the date of the offer prospectus that it has taken all required steps to ensure that the consideration will be available at the settlement date, which must be confirmed by the independent review body in its report to the shareholders.

If 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 has to publish interim financial statements in its report on the offer. Otherwise it must confirm that there has been no material change in the financial situation of the company since the closing date of the last published financial statements.
2.11 What are the key costs?

3 Friendly or Hostile
3.1 Is there a choice?

In addition to advisory fees, a public takeover offer may give rise for the bidder to: printing and publication costs of roughly CHF 100,000 or more; fees of the review body of roughly CHF 80,000 to 150,000; a fee of the TOB between CHF 25,000 and CHF 250,000; a commission per tendered share payable to the depository banks that depends on the magnitude of the contemplated transaction; and fees payable to the provider of the fairness opinion (if any). In addition, the acquisition of the shares of the target company is

There is no requirement to notify the target board or the TOB of an offer before announcing it publicly. Also, the number of unfriendly offers has increased in Switzerland in recent years.
3.2 How relevant is the target board?

One reason for securing the support of the target board prior to launching an offer is due diligence. Once announced, an offer

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cannot in principle be withdrawn, and the offer price can in principle not be reduced. Due diligence, if any, must therefore be conducted before the offer is made. The target board is restricted by law in its ability to frustrate the offer or take defensive measures. However, the target board will often play an active role in the event of an unsolicited offer, most importantly by searching for a white knight. The target board will publish a detailed report in relation to the offer, in which it will give a recommendation to accept or not accept the offer or simply summarise the advantages and disadvantages of the offer. The importance of the board will generally increase if the targets articles of association contain defensive mechanisms. The removal of such devices will require a general meeting, which is a forum where the board has an advantage.
3.3 Does the choice affect process?

Switzerland
information relating to their business activities. However, the listing rules allow issuers to postpone disclosure while significant transactions such as takeovers are being negotiated on the condition that confidentiality be strictly maintained. Immediate disclosure is required if confidential pricesensitive information leaks.
4.3 What will become public?

Switzerland

The bidder is required to disclose in the offer prospectus the main terms of the agreements that it has entered into with the target company, its directors, senior officers or shareholders. The bidder must also certify in the offer prospectus that it has not received from the target company, directly or indirectly, information relating to the target that is not publicly available and could have a material influence on the decision of shareholders to accept the offer.
4.4 What if the information is wrong or changes?

The TOB generally reviews agreed offers prior to publication, whereas this is not always the case with hostile bids. Also, the target board will not issue its report regarding a hostile offer simultaneously with the offer prospectus, but within fifteen trading days from the prospectus date. As a result, the review of the offer documents takes longer in a hostile situation than in an agreed bid.

The bidder and the target are under an ongoing duty to supplement the offer documents until expiration of the acceptance period to reflect new information material to the offer. The offer, once announced, can usually not be withdrawn or amended to the detriment of the shareholders of the target company. However, the TOB allows bidders, within certain boundaries, to make their offers conditional upon the absence of material adverse changes in the targets business (see question 7.1).

4 Information
4.1 What information is available to a buyer?

The Swiss commercial register contains basic information that the public can access (e.g. corporate name, share capital, etc.). In particular, the companys articles of association and any document relating to a registration in the commercial register are publicly available. Any entry in the commercial register is published in the Swiss Official Gazette of Commerce along with any information required by law (e.g. notices to creditors in case of share capital reductions or liquidation). Notices of significant shareholdings (see question 5.2) are also published in the Gazette or on an internet platform of the stock exchange where the shares are listed. Swiss listed companies are required to make their annual reports (including financial statements and the auditors report) publicly available. Moreover, companies listed on the SIX are required to include a corporate governance report in their annual report. Under the listing rules of the SIX, issuers are required to publish price-sensitive information by means of press release (see question 4.2). The relevant releases must be posted on the issuers website and remain available there for two years. Information on issuers is also available on the website of the SIX. Other sources of information include the patent register and trademark register, which can be searched in relation to intellectual property rights. Land and debt enforcement proceedings registers may be consulted under certain circumstances. Access to the tax register depends on the regulations of each Swiss canton. Finally, under the Swiss takeover regulations, any bidder must be given reasonable access to the due diligence materials that the target has provided to (actual or prospective) competing bidders.
4.2 Is negotiation confidential?

5 Stakebuilding
5.1 Can shares be bought outside the offer process?

Yes, shares can be bought outside the offer process. In an exchange offer, cash purchases may force the bidder to add a cash alternative to its offer.
5.2 What are the disclosure triggers?

Under the Swiss significant shareholding rules, any person must notify the relevant company and stock exchange if it reaches, exceeds or falls below 3, 5, 10, 15, 20, 25, 331/3, 50 or 66 % of the voting rights of the target. In addition, once the offer is announced, the bidder, the persons acting in concert with the bidder, the target, the other persons taking part in the proceedings before the TOB (see question 2.3 above) and, under certain circumstances, the significant shareholders of the target or of the company whose securities are being offered in exchange, must notify the TOB and the relevant exchange within one trading day of any trade in the equity securities of the target or in the securities offered in exchange. The notices are published on the website of the TOB.
5.3 What are the limitations?

The price paid by the offeror for shares outside the offer should not exceed the offer consideration. If the bidder pays a higher price outside the offer, it must increase the offer price accordingly (best price rule). The best price rule applies in principle between the announcement of the offer and the date that is six months from the expiration of the offers acceptance period.

Pursuant to the listing rules of the SIX, issuers are generally required to promptly disclose price-sensitive, non-public

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Switzerland

6 Deal Protection
6.1 Are break fees available?

The bidder and the target can agree on a break fee, provided that this does not result in coercing shareholders to accept the offer. As a general guideline, break fees should not substantially exceed the cost incurred by the bidder in connection with the offer. In the past, break fees have ranged from CHF 800,000 (Forbo) to CHF 20 million (Centerpulse/Smith & Nephew). Break fees must be disclosed in the offer documents.
6.2 Can the target agree not to shop the company or its assets?

7.2

What control does the bidder have over the target during the process?

The general perception is that the target company and its board may agree to refrain from soliciting third party offers or similar proposals in competition with a recommended bid (no shop). However, the target board should retain the right to respond to unsolicited proposals to the extent required by its fiduciary duties, including by way of disclosing non-public information to, or entering into negotiations with, the third party making such proposal.
6.3 Can the target agree to issue shares or sell assets?

The ability of the target board to take frustrating actions during the offer period is restricted by law (see question 8.2). Also, the bidder may identify certain assets as the main subject matter of its offer. Assets so identified cannot be disposed of or encumbered without shareholder approval. The bidder may also make its offer subject to the absence of certain material adverse changes in the target companys business. In a friendly transaction, the target will generally undertake not to take any action outside the ordinary course of business until settlement of the offer.
7.3 When does control pass to the bidder?

Public takeover offers are usually structured so that effective control passes to the bidder upon settlement of the offer.
7.4 How can the bidder get 100% control?

Any agreements or undertakings by which the target board prejudices potential competing offers are critical both under the takeover rules and the boards fiduciary duties. The target board cannot therefore in principle agree to issue shares or sell assets to support the preferred bidder, neither in advance nor upon announcement of a competing bid, except if approved by the shareholders meeting or under certain other conditions.
6.4 What commitments are available to tie up a deal?

Pursuant to SESTA, a bidder that holds 98% or more of the voting rights of the target following completion of a public takeover offer may apply for a court decision cancelling the remaining equity securities of the target. The request must be made within three months after expiration of the offers acceptance period. Obtaining the appropriate court decision takes approximately six months. The right to squeeze out minority shareholders is a right of the bidder. Swiss law does not entitle minority shareholders to be bought out after a successful offer. A bidder holding 90% of the share capital and voting rights of the target may also carry out a squeeze-out merger. In such a case, the remaining shareholders can be forced to accept cash or any other kind of assets in exchange for their shares of the target. Shareholders of the target do not have an appraisal right in a squeeze-out process carried out pursuant to SESTA, but do have such a right in the event of a squeeze-out merger.

The ability of a bidder to protect his transaction is limited under Swiss law. In principle, the target board cannot enter into agreements frustrating potential or actual competing bids without shareholder approval. Undertakings from shareholders to accept an offer can be revoked in the event of a competing bid. The ability of the target company to pay break fees is limited (see question 6.1). One route for a bidder to fend-off potential competitors is to build up a stake in the target.

8 Target Defences 7 Bidder Protection

8.1 7.1 What deal conditions are permitted? Does the board of the target have to tell its shareholders if it gets an offer?

Voluntary bids may be subject to conditions, the fulfilment of which is beyond the bidders control, can be assessed objectively, and does not require actions from the target that could be held as unlawful (in particular a violation of the boards fiduciary duties). The TOB may also strike out conditions that it finds over-protective for the bidder. The most typical kind of permissible conditions are acceptance conditions (typically two thirds of the targets issued shares), competition clearance, removal of share transfer or voting right restrictions in the articles of association of the target, absence of material adverse changes and valid issuance or listing of securities offered in exchange. In principle, conditions must be either fulfilled or waived upon expiration of the offers initial acceptance period. However, the

The listing rules of the SIX require issuers to promptly disclose price-sensitive, non-public information relating to their business activities (see question 4.2). An unsolicited approach is generally deemed price-sensitive. It is generally considered that no disclosure is required if the offer is being made subject to certain conditions such as satisfactory due diligence and that the board of directors rejects the approach. However, disclosure may be required if a hostile bid is to be expected.
8.2 What can the target do to resist change of control?

Under the Swiss takeover rules, the board of directors is prevented from taking frustrating actions during an offer period without

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TOB may authorise a bidder to make its offer subject to conditions that will only be fulfilled or waived at a later point in time prior to settlement. This is typically the case where the settlement of the offer requires antitrust clearance, regulatory approval, or the issuance and/or listing of the securities offered in exchange.

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shareholder approval. Frustrating actions include, without limitation, the sale of corporate assets representing more than 10% of the latest annual balance sheet total or which contribute by more than 10% to the companys profitability, the sale or encumbrance of any part of the company or intangible asset that has been identified by the bidder as the main subject matter of the offer, as well as execution of agreements with members of the board of directors or senior management providing for unusually high severance payments. The takeover rules also restrict the ability of the targets board of directors to issue new equity securities without preemptive rights or to repurchase own shares during the offer period. The Swiss takeover rules also prohibit defensive measures that are in manifest violation of Swiss company law. In the past, the TOB and the FBC (now the FINMA) held illegal severance agreements that were entered into shortly prior to a hostile takeover approach, exempting senior executives from their duties to work for and not to compete with the company during the notice period if such executives were terminated following a change of control.
8.3 Is it a fair fight? 9.2 What happens if it fails?

Switzerland

A bidder will generally gain effective control over a Swiss target (including the right to appoint and remove directors) if it acquires 50% of the voting rights represented at the companys general meetings. However, at least 66 % of the voting rights and the majority of the stated share capital represented at a shareholder meeting is generally required to pass certain resolutions, such as creating an authorised or conditional share capital, increasing the existing share capital by way of capitalisation of reserves or against contributions in kind, and restricting or terminating shareholders pre-emptive rights or merging the company with or into another entity. Absent any blocking minority, the fact of not being able to squeeze out minority shareholders will generally result in requiring the bidder to share any dividend payments with minority shareholders, limiting the flexibility to hold shareholders meetings of the target, and creating a risk of litigation with minority shareholders.

Switzerland

10

Updates

The mandatory offer rules protect minority shareholders against the most obvious coercive tactics that can be implemented by bidders (e.g. two-tiered, front-end loaded offers). Conversely, the target board is restricted in its ability to take frustrating actions or to implement defensive tactics. Also, by limiting the ability of the target to pay break fees and of the bidder to obtain hard irrevocables, the takeover regulations and the TOB are endeavouring to create a level playing field in the market for corporate control. This principle, however, is not always implemented consistently. For example, under the practice of the TOB, the FBC (now the FINMA) and the Swiss Supreme Court, targets must provide bidders with all the diligence materials transmitted to potential competing bidders even before a competing bid is made. This practice may hinder the targets efforts to identify white knights and to successfully create an auction for the company. The question of whether the limited degree of deal protection available to bidders and the difficulty for targets to search for white knights is beneficial or detrimental to the targets shareholders is a matter of debate in Switzerland.

10.1 Please provide, in no more than 300 words, a summary of any relevant new law or practices in M&A in Switzerland.

9 Other Useful Facts

9.1 What are the major influences on the success of an acquisition?

The Swiss rules on public tender offers were amended with effect as of 1 January 2009. The most significant change that was introduced on this occasion was the ability of shareholders holding 2% or more of the voting rights of the target to participate to the TOBs proceedings and to challenge the TOBs rulings. This new regime significantly changed the nature of the takeover proceedings. In the past, the TOBs rulings could in principle only be challenged by bidders and targets. This provided certainty to the parties in agreed bids and predictability to the takeover process. The participation of shareholders to the proceedings has, however, changed this situation. Bidders must now take into account that the legality of their bid can be challenged after its publication. This can impact on the financial terms of the offer if an infringement of the rules governing the minimum price of the offer or the best price rule is alleged. The unsolicited offer of the French insurer MMA for the company Harwanne at the beginning of 2009 demonstrated that this risk is not only theoretical. It remains to be seen whether this new situation will affect the Swiss market for corporate control. The recent drop in the number of public takeover offers in Switzerland seems to be more related to the current economic situation than to the changes to the regulatory environment. The new rules also allow the TOB to issue put up or shut up statements, and to order a person who has publicly announced to be considering an offer, to clarify its intentions within a certain period of time. The change is welcome, since its brings some clarity to the regime applicable where a bid is threatened without being actually made.

The existence of shareholders holding more than 10% of the shares of the target (thereby potentially preventing any subsequent squeeze-out merger) can arguably help in deflecting unsolicited takeover approaches. The presence of defensive devices in the articles of association of the target (e.g. share transfer or voting right restrictions) is also an important factor. Absent any majority shareholder, companies that have adopted opting out or opting up provisions (see question 2.5) tend to be more vulnerable to hostile approaches than companies that have not adopted such provisions.

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Switzerland

Jacques Iffland
Lenz & Staehelin Route de Chne 30 1211 Geneva 17 Switzerland

Hans-Jakob Diem
Lenz & Staehelin Bleicherweg 58 8027 Zrich Switzerland

Tel: Fax: Email: URL:

+41 58 450 70 00 +41 58 450 70 01 jacques.iffland@lenzstaehelin.com www.lenzstaehelin.com

Tel: Fax: Email: URL:

+41 58 450 80 00 +41 58 450 80 01 hans-jakob.diem@lenzstaehelin.com www.lenzstaehelin.com

Jacques Iffland is a partner in the Corporate and M&A practice group of the Geneva office of Lenz & Staehelin. He specialises in securities regulations and general corporate matters, with an emphasis on public takeovers. He advises both bidders and targets on a regular basis. Before joining Lenz & Staehelin, he worked for several years as a legal adviser with the Swiss Takeover Board. He studied Law at the University of Lausanne, Switzerland, where he obtained a doctoral degree with a thesis on market manipulations.

Hans-Jakob Diem is a partner in the Corporate and M&A practice group of the Zurich office of Lenz & Staehelin. He studied Law at the University of Basel, Switzerland, and is a graduate of the LL.M. programme at the London School of Economics, London (1998). Hans-Jakob Diem specialises in Mergers & Acquisitions and general corporate matters, with an emphasis on public takeovers. He advises both bidders and targets on a regular basis.

Lenz & Staehelin is the largest law firm in Switzerland with offices in Zurich, Geneva and Lausanne. The firm comprises more than 150 qualified lawyers and provides advice mainly to larger corporate clients in Switzerland and abroad on a wide range of legal matters. Lenz & Staehelin operates at both the national and international level. In Switzerland, it has a prominent position in the two main language areas, and is equipped to provide its international clients with advice on all relevant domestic and crossboarder legal matters.

ICLG TO: MERGERS & ACQUISITIONS 2011

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Switzerland

The International Comparative Legal Guide to:

Mergers & Acquisitions 2011

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