Swiss Due Diligence Crucial in Distressed M&A Transactions, Experts Warn

Switzerland’s economy is navigating turbulent waters, and experts are sounding the alarm on the importance of due diligence in distressed mergers and acquisitions (M&A) transactions.

The Risks of Inadequate Due Diligence

With companies facing financial distress, there is often little time to conduct a thorough due diligence exercise. This leaves buyers with limited access to crucial information, putting them at risk of making costly mistakes.

Key Areas of Focus

In this high-stakes environment, it’s essential for buyers and their advisors to focus on key areas such as:

• Financials
• Change of control provisions
• Legal implications of distress
• Employment issues
• Intellectual property rights

“These critical issues can have a significant impact on the transaction’s success,” said [Expert Name], a leading due diligence expert in Switzerland.

Conducting Exhaustive Searches of Public Records

To mitigate risks, experts recommend conducting exhaustive searches of public records. In Switzerland, this typically includes:

• Examining the Swiss Commercial Register to obtain details about the target company’s legal existence and structure
• Reviewing articles of association, debt collection registers, and bankruptcy and insolvency records
• Scrutinizing public announcements and notices in the Swiss Official Gazette of Commerce
• Reviewing the Real Property Register and Intellectual Property Register

These searches can provide valuable insights into the target company’s assets and liabilities, helping buyers make informed decisions.

Contractual Protections and Risk Mitigation Strategies

Contractual protections and risk mitigation strategies are also crucial in distressed M&A transactions. While warranty and indemnity insurance may not always be available due to diligence gaps, experts recommend negotiating robust representations and warranties from sellers to mitigate risks.

The Consequences of Inadequate Due Diligence

In the absence of comprehensive due diligence, buyers often accept associated risks and offset them against lower purchase prices offered by distressed sellers. However, this approach can come with significant costs and liabilities down the line.

Prioritizing Due Diligence in Distressed M&A Transactions

As Switzerland’s economy continues to evolve, it’s clear that due diligence will play a vital role in M&A transactions. By prioritizing exhaustive searches of public records and negotiating robust contractual protections, buyers can minimize risks and maximize returns in these complex and high-stakes deals.

Conclusion

In conclusion, due diligence is crucial in distressed M&A transactions. Buyers must prioritize comprehensive due diligence to ensure successful transactions and avoid costly mistakes.