SWITZERLAND Law and Practice Contributed by: Christoph Neeracher, Philippe Seiler and Lukas Bründler, Bär & Karrer Ltd
4. Due Diligence 4.1 General Information
Switzerland. In the case of a reinvestment or a partial sale, a shareholders’ agreement is concluded in con - nection with the transaction. The terms of the acquisition are different between a privately negotiated (one-on-one) transaction and an auction sale, as the “hotter” the auction, the more seller-friendly the terms of the acquisition agreement. This relates to the price certainty (locked-box v clos - ing adjustment) and transaction certainty (conditions precedent, hell or high water” clause, etc), as well as the liability concept (warranty and indemnity (W&I) insurance, cap, specific indemnities, etc). 5.2 Structure of the Buyer Given the extensive flexibility in Switzerland, a wide array of transaction structures is observed. The pre - dominant structure for private equity funds to invest in or acquire a Swiss target company involves the estab - lishment of a special purpose acquisition vehicle, commonly referred to as NewCo or AcquiCo. AcquiCo may be held either directly or, predominantly for tax or financing purposes, through another special purpose vehicle located in Switzerland or abroad. In anticipa - tion of an exit and the associated potential liabilities, the fund typically refrains from becoming a party to the acquisition or sale documentation. The acquisition structure is generally influenced by considerations of tax efficiency and financing, such as the tax-efficient repatriation of dividends, the applica - tion of double taxation treaties, and ensuring a tax- exempt exit. A Swiss-domiciled seller or manager reinvesting in AcquiCo may realise a tax-free capi - tal gain upon the sale of AcquiCo during an exit. In an auction process, meticulous consideration of tax implications can provide a significant advantage to a bidder. 5.3 Funding Structure of Private Equity Transactions Swiss transactions are typically still, at least par - tially, debt-financed. Although higher interest rates and lower debt ratios make it more challenging for private equity firms to secure financing and support valuations for large acquisitions, borrowing conditions remain comparatively attractive in Switzerland, with the policy rate having been cut to 0% in June 2025
The vast majority of legal due diligences are conduct - ed on an exception basis only (ie, only highlighting red flags). Only in specific cases are summaries or overviews produced (eg, overview of key terms of the important business contracts, the employment agree - ments with key employees or lease overviews). The typical scope of a legal due diligence covers corpo - rate matters, financing agreements, business agree - ments, employment (excluding social security and pension), real property/lease, movable assets, intel - lectual property (IP)/information technology (review of an IP portfolio and contracts from a legal perspective), data protection and litigation. Compliance and regula - tory topics are included to the extent relevant for the specific business. 4.2 Vendor Due Diligence The conduct of a vendor due diligence in Swiss pri - vate equity transactions depends on the type of trans - action and process. While vendor due diligences are often conducted in complex and large-scale trans - actions to expedite and facilitate the sales process in structured auctions, they are uncommon in small- scale and/or low-complexity transactions and bilateral processes. Recently, there has been an increase in the frequency of sales preparations and vendor due diligence. The result of a vendor due diligence is typically a report that summarises material legal key terms as well as highlighting certain red flags. The vendor due diligence reports are often used as a starting point for the buyer’s own legal due diligence and to define the focus of the buyer’s own due diligence. However, ven - dor due diligence reports usually do not fully replace a buyer’s own due diligence – even if reliance is granted (which is typically the case).
5. Structure of Transactions 5.1 Structure of the Acquisition
Most acquisitions of Swiss target companies by pri - vate equity funds are carried out by Swiss law-gov - erned share purchase agreements with jurisdiction in
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