Navigating distressed M&A in the current economy: A comprehensive overview
25.01.2024 / Berweger Martin, Frey Andrea Riccardo
The landscape of distressed Mergers and Acquisitions (M&A) in Switzerland presents a unique combination of opportunities and challenges. As global economic factors and local market dynamics evolve, understanding the nuances of this sector is crucial for stakeholders looking to navigate these complex waters successfully.
The latest Lexology Panoramic – Distressed M&A 2024 publication offers a comprehensive reference guide. It facilitates a comparative analysis of local insights, encompassing aspects such as market climate, legal frameworks, due diligence, risk mitigation, and recent trends in distressed M&A.
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Market climate and trends
The Swiss distressed M&A market has witnessed fluctuating trends. The year 2023 began with a slower pace due to macroeconomic uncertainties and geopolitical tensions. However, as the year progressed, there was a noticeable upswing in distressed M&A activities, driven by the changing market conditions. This shift highlights the need for adaptability and strategic foresight in distressed M&A dealings.
Legal and regulatory framework
The legal landscape in Switzerland is intricate, with the Debt Collection and Bankruptcy Act playing a pivotal role. This law can potentially dictate the course of distressed M&A transactions. Navigating this legal terrain requires a deep understanding of the implications and potential pitfalls associated with each transaction type.
Risks and considerations
Distressed M&A comes with its set of risks, notably the potential for inheriting unknown liabilities and the challenge of operating within tight timelines. It is imperative for participants in this sector to be well-informed and prepared to address these risks head-on.
Transaction structures
Common transaction structures in distressed M&A include share deals and asset deals including pre-packaged sales. Each of these structures offers different approaches to the transfer of assets, liabilities and/or contracts, with their respective advantages and drawbacks. A comprehensive understanding of these structures is essential for making informed decisions.
Practical tips and insights:
- Due Diligence: In distressed M&A, due diligence must be swift yet thorough, focusing on the most critical areas due to the often limited time and information available.
- Valuation and Financing: A clear understanding of valuation methodologies and diverse financing options is crucial for aligning transaction objectives with market realities.
- Transaction Security: The interests of the creditors of a distressed company must at all times be given appropriate consideration in order to avoid exposing a transaction to the risk of subsequent legal challenge.
Conclusion
The realm of distressed M&A in Switzerland requires a careful blend of strategic planning, legal expertise, and market acumen. Staying informed and adaptable to the latest trends and regulatory changes is crucial for those looking to successfully navigate the complexities of distressed M&A transactions. This dynamic sector continues to evolve, offering both challenges and opportunities for astute investors and businesses alike.
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Acknowledgements
This article and the publication are based on content from Lexology Panoramic (former Getting the Deal Through) – Distressed M&A 2024, edited by Mark Geday, Paul Denham and Kristen V. Campana. For more information, please visit www.lexology.com/panoramic.