M&A, sell-side
Process is doctrine. Management conflicts and single-bidder locks are the two recurring failures.
Note
References include Art. 717 OR and — for listed companies — the Swiss Takeover Code and Financial Market Infrastructure Act (FMIA / FinfraG).
An unsolicited approach has landed on the chair’s desk. Or the board has concluded that strategic optionality would benefit from a formal sale process. Or a controlling shareholder has communicated their intention to exit. Swiss corporate law does not contain a doctrinally named Revlon duty directing the board to maximise shareholder value once a sale becomes inevitable. What it contains, under Art. 717 OR, is the same duty to orient decisions to the company’s interest with adequate information and on a conflict-managed basis — and in practice, that standard polices a sale process with almost the same intensity as Delaware law. The two failures that recur: management conflicts on retention, and a process that was not, materially, a process.
1. The duties that bear on this
The care standard is procedural. The board’s duty under Art. 717 OR in a sale is to run an adequate information-gathering process, to consider material alternatives, and to decide on a basis that a later reviewer can reconstruct. There is no Swiss equivalent to a duty to “achieve the best price reasonably available” — but the absence of a formal duty does not make an unreasoned decision defensible. The procedural record is what the court will read.
Management loyalty is structurally compromised. Management — CEO, CFO — will frequently have significant financial upside from a sale to a particular buyer: retention packages, acceleration of equity, enhanced rollover economics. The board cannot rely on management’s recommendation at face value on questions that touch management’s retained compensation. Structural separation of the sale-process committee from management is the only adequate response.
For listed companies, takeover-law overlays apply. The Swiss Takeover Code and the Financial Market Infrastructure Act (FMIA / FinfraG) apply specific fiduciary and disclosure obligations once a tender offer is made or is reasonably in prospect. The board’s report to shareholders under Art. 132 FMIA is a formal document, prepared to a prescribed standard, on which the board’s procedural record will be tested.
2. The process
- Establish a transaction committee of non-conflicted directors at the moment a sale becomes plausible. “Non-conflicted” excludes directors aligned with a bidder, with management’s retention package, or with the controlling shareholder’s specific interests where these diverge from the minority.
- Engage independent financial adviser and counsel for the transaction committee, reporting to the committee, not to management. This separation is what makes the committee’s recommendation credible.
- Agree an explicit process: broad auction, limited market check, negotiated bilateral — each has a defensible place, but the choice must be made on the record and justified.
- Commission a standalone-plan valuation, a market-based trading valuation, and — at the committee’s discretion — a fairness opinion. Triangulate; do not rely on a single input.
- Separate management’s retention conversations from the sale conversations by process and counsel. Retention arrangements agreed under pressure during active deal negotiations contaminate the record.
- Control information: a disciplined data room, NDA discipline, clean-team protocols where sensitive information flows to a competitor.
- Document the transaction committee’s deliberations in substantive minutes. Its recommendation to the full board is the core procedural record.
- Full-board consideration and approval, with the committee chair presenting and dissents recorded.
- For listed companies: the Art. 132 FMIA board report, the takeover-offer response, and the statutory disclosures — each on the Takeover Code timeline.
3. Questions to ask the committee and advisers
- What is the standalone plan value and what are its key sensitivities?
- What are the realistic alternative buyers, and have we tested the market adequately?
- What is management’s personal economic interest in the outcome, by bidder?
- Where in the financial adviser’s valuation range does the current offer sit, and what structure would move it upward?
- Is there a fairness opinion, and on what methodology?
- Are we exposed to any lock-up, exclusivity, or break-fee commitments that limit the board’s ability to accept a superior offer?
- For listed companies: is the board’s Art. 132 FMIA report balanced, informative, and in substance on all material matters?
- What is the regulatory-approval path — competition, FINMA, foreign direct investment — and what is the risk of each?
- What is the tax treatment at company and shareholder level, and have we compared structures?
- What are the contingent post-closing exposures — warranty and indemnity, earn-out disputes, pension funding, litigation tail — and how are they allocated?
4. The record to leave
The committee’s establishment, composition, and conflict screening; the engagement letters of independent advisers; the memos and presentations from advisers to the committee; the committee’s deliberations and recommendation; the full-board minutes and resolution; the fairness opinion and its scope letter; the Art. 132 FMIA board report for listed companies. The sale-process file is the defence against subsequent challenge — shareholder dissent, regulator review, buyer dispute — and should be built to be read.
5. Failure modes
The management-led process. Management selects the financial adviser, conducts the bidder outreach, manages the diligence, and presents a recommendation the board accepts. The process is formally run; substantively, it was management’s. Shareholder challenge — under Art. 706 OR on the capital resolution, or via activist engagement before the deal closes — surfaces the pattern quickly.
The single-bidder lockout. One bidder is granted exclusivity early on terms that preclude a market check, a no-shop survives into the merger agreement, and a superior bidder who surfaces three weeks before closing is contractually out. The board’s subsequent approval of the deal is tested against the absence of a market test the company could have run.
The retention-conditioned recommendation. Management’s retention package was negotiated in the week of the transaction committee’s recommendation, with the same counsel involved. The sale recommendation and the retention package move in the same timeframe; the record does not separate them. In the subsequent derivative claim, the structural conflict is the pleading.
Cognitive register. Active M&A processes generate their own psychological field. Escalation of commitment (Staw, 1976) causes boards to proceed past points where the deal has stopped making sense — each prior step increases the sunk cost of withdrawal and the social cost of “wasting” advisor time. Reference-price anchoring means the first offer becomes the committee’s frame; subsequent analysis orbits it. “Deal heat” — the social intensity of an active process — creates a momentum that makes withdrawal feel like failure even where withdrawal is the right answer. The standalone-plan valuation (process step 4) is structurally important not because it produces the right number but because it preserves the counter-factual: a board that has articulated what it would do if no sale happened can recognise when the deal on offer is inferior to the alternative.