SWITZERLAND Law and Practice Contributed by: Christoph Neeracher, Philippe Seiler and Lukas Bründler, Bär & Karrer Ltd
comes into use, a designated expert, mostly likely an auditing firm, determines the final and binding com - pletion accounts and determines the adjustment of the purchase price in accordance with the respective agreement, if any. 6.4 Conditionality in Acquisition Documentation The typical level of conditionality in Swiss private equity transactions is usually limited to the manda - tory regulatory conditions, which are reflected in the transaction documentation as conditions precedent to closing. These typical regulatory conditions are approvals from regulatory bodies, ie, a merger filing with the local competition authority, which evaluates whether the transaction would violate antitrust regula - tions, but also industry-specific regulations need to be considered, eg, licences in the pharmaceutical sector. Especially in transactions involving multiple jurisdic - tions, possible merger and foreign direct investment filings need to be taken into consideration and might significantly prolong the period required to close after signing. Depending on the transaction, it can be quite com - mon to have further conditions such as financing or third-party consent. The latter in particular can be critical, eg, if the target has material agreements in place that are essential for the business and that con - tain change-of-control provisions, but the buyer has a strong interest in keeping such agreements in place, even after the transaction (eg, supply/customer or lease agreements). Lastly, material adverse change (MAC) clauses have not frequently been seen in recent years as sellers rarely accept these types of clauses in view of the reduced transaction certainty that comes with MAC clauses. Further, MAC clauses are generally less fre - quent in Swiss transactions, in particular compared to US transactions. 6.5 “Hell or High Water” Undertakings Coming from a very seller-friendly market during the immediate post-pandemic period where “hell or high water” undertakings were often included in the merg - er clearance closing conditions, “hell or high water”
undertakings are still regularly seen but have become more heavily negotiated in the past 12 months or so. 6.6 Break Fees In public M&A transactions, break fees are not uncom - mon, but are only allowed by the Swiss Takeover Board if the amount of the break fee is proportionate and if it serves the purpose of lump-sum compensa - tion for damages and does not constitute an exces - sive contractual penalty. In any case, a break fee is not allowed to restrict shareholders significantly in their freedom to accept or not accept an offer and/ or deter potential competing offerors. The amount of the break fees is in most cases significantly less than 1% in relation to the transaction amount. For private M&A transactions, however, break fees are an unusual instrument, since there are other mechanisms to keep the buyer indemnified due to a breach of contract. Reverse break fees are relatively rarely seen in private equity transactions since sellers often insist on actual financing proof. 6.7 Termination Rights in Acquisition Documentation Usually, a private equity seller or buyer can terminate the acquisition agreement prior to closing if the condi - tions precedent to closing have not been met before a certain agreed date (ie, longstop date). A typical longstop date is often set at around 6 to 12 months from the date of signing, but it can vary depending on factors such as deal complexity, size, negotiations between parties, required regulatory approvals and other relevant considerations. Other than that, Swiss acquisition agreements typically do not contain any (ordinary) termination rights. However, under Swiss law, under certain conditions there is a possibility to terminate a share purchase agreement in the event of a severe breach of the agreement; any such ter - mination right is usually – to the extent permissible – excluded as regards a breach of representations or warranties. In such a case of a termination, compen - sation for damages may be claimed. 6.8 Allocation of Risk The typical methods for the allocation of risks are (i) representations and warranties for general (unidenti - fied) risks and (ii) indemnities for specific risks identi - fied during due diligence; eg, tax liabilities or pending
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