SWITZERLAND: An Introduction to Corporate/M&A

Switzerland’s political system is based on federalism and direct democracy. The federal structure consists of three levels: the confederation, 26 cantons and approximately 2,130 municipalities. The cantons enjoy broad autonomy in many areas including taxation, public law and the organisation of the courts within the limits of federal law. However, legislation regarding civil and criminal procedure and substantive laws, including corporate and securities laws, is predominantly a federal matter. The same applies to most financial market regulations. In the Swiss system of direct democracy, the people are given a direct say in the legislative process to an extent that is unparalleled in most other countries.

Many factors make Switzerland an attractive place to do business and live. Switzerland is a politically stable country with one of the highest per capita GDPs in the world. It has a prosperous and modern market economy, characterised by low inflation (around 1.1% in 2024) and a low unemployment rate (around 2.8% as of December 2024). The country also benefits from a skilled workforce and well-developed infrastructure, including reliable public transport. In 2024, Switzerland ranked – for the 14th year in a row – as the world’s most innovative economy according to the Global Innovation Index.

Investors and businesses operating in Switzerland benefit from a competitive and stable economy, a business-friendly and innovative legal environment and an efficient, reliable judicial system. The country also offers one of the highest standards of living in the world, making it highly attractive to top talent. According to the Index of Economic Freedom, Switzerland ranks first in Europe and second globally for economic freedom, mainly because of its openness to foreign trade and investment. Switzerland is home to a strong and internationally oriented financial marketplace and has a very strong start-up and blockchain ecosystem, attracting both investors and professionals.

Switzerland offers a highly investor-friendly regulatory environment. To date, there are no general foreign investment restrictions based on national interests that apply irrespective of the industry sector or impose general notification obligations on foreign investors. A legislative project is underway to introduce a still-liberal investment control regime. Exceptions exist in certain industries such as banking, securities trading, insurance and real estate. For example, the Swiss federal legislation on the acquisition of real estate by persons abroad (so called Lex Koller) prohibits the acquisition by non-Swiss persons of residential real estate or commercial real estate with considerable land reserves and restricts the acquisition of real estate companies holding non-commercial real estate as their main purpose. Further, even though Switzerland is not a member of the EU, EU directives and regulations play an important role, such as the GDPR, which is directly applicable to Swiss-based companies doing business in the EU. Consequently, the Swiss legislature has worked out a reform of the Federal Act on Data Protection, which came into force on 1 September 2023.

On 1 January 2023, the reform of Swiss corporate law entered into force. Key changes related to increased flexibility in various areas (eg, share capital in foreign currencies, possibility of virtual shareholders’ meetings) and strengthened minority shareholder rights. Companies had a two-year timeframe (until 1 January 2025) to amend their existing articles of association and internal regulations to reflect the new regulations.

As of the financial year 2023, certain businesses had to comply with the new ESG reporting criteria, depending on their size and significance (eg, larger companies with a minimum of 500 FTE and either a balance sheet exceeding CHF20 million or revenues exceeding CHF40 million). Starting in 2024, in-scope Swiss companies were required to sign-off and publish an annual ESG report taking non-financial factors into account (particularly, corporate strategy, emerging dangers to the environment, personnel, human rights and efforts the organisation has taken in this regard). In June 2024, the Swiss Federal Council proposed measures to align Switzerland’s sustainability-related corporate governance rules with international standards, particularly the EU’s CSRD. The proposal seeks to expand the scope of sustainability reporting, among others, by lowering the threshold from companies with over 500 FTE to those with 250 FTE.

In December 2023, the Swiss Federal Council decided to implement the OECD/G20 minimum tax rate by introducing a supplementary tax, effective 1 January 2024. This supplementary tax ensured that if a company’s effective tax rate falls below the threshold, an additional levy will be imposed to bridge the gap. Additionally, an international supplementary tax came into effect on 1 January 2025. Under this measure, the profits of foreign subsidiaries of Swiss corporate groups and of holding companies of foreign corporate groups are subject to a 15% tax rate, provided the group’s global annual turnover is at least EUR750 million. In Switzerland, this measure only affects a limited number of domestic and foreign corporate groups. Consequently, around 99% of companies in Switzerland remain unaffected by the reform and will maintain their current tax treatment.

As of 1 January 2025, Switzerland has introduced stricter measures against abusive bankruptcies to prevent debtors from evading their financial obligations through fraudulent bankruptcy. Additionally, the revised Civil Procedure Code took effect on 1 January 2025, enhancing access to the courts, eg, by generally halving cost advances. The revision further enables the cantons to establish international commercial courts, allowing disputes involving at least one foreign party to be resolved before Switzerland’s relatively efficient state courts. The cantons of Zurich and Geneva are expected to make use of this possibility, though the timeline for implementation remains uncertain. Commercial proceedings and judgments can now also be conducted entirely in English.

Activity on the Swiss M&A market remains strong following the record-level of deal activity in 2021 and 2022. However, the negative movement on the stock markets in the first half of 2024, the prospects of runaway inflation, fears of recession, Russia’s invasion of Ukraine, and further geopolitical risks still dampened the risk appetite of M&A investors. The total number of M&A transactions in 2024 was slightly lower than in 2023 in terms of the number of transactions, but with a larger total volume. Swiss small and medium-sized enterprises (SMEs) continued to be attractive targets for investors in 2024, with increased private equity participation. Just as in 2023, the M&A deal flow and volume was particularly dominated by the industrial and TMT markets and continued to be strong in the pharmaceutical and life science sector.

The most remarkable deal in recent years, the rescue and merger of Switzerland’s two largest banks, UBS and Credit Suisse, following discussions initiated by the Swiss Federal Department of Finance, the Swiss Financial Market Supervisory Authority and the Swiss National Bank, was successfully completed on 1 July 2024. Other prominent transactions over the last year included the IPO of Galderma Group AG on the SIX Swiss Exchange for USD21.6 million, the sale of DSM-Firmenich’s stake in Robertet S.A. in November 2024, the acquisition of a majority stake in the wealth management platform Cinerius Group in February 2024 as well as the sale of Alpha Associates AG to a leading European asset manager.

After some years of economic and geopolitical challenges, we generally expect the Swiss M&A market to be strong in this new year, with private equity firms continuing to expand their involvement and driving future M&A opportunities in Switzerland in 2025.