IFLR 1000
The Guide to the World's Leading Financial Law Firms

CONTEXT AND TRENDS
The Swiss economy and its companies are well funded and so, as usual, the market remained stable. Nevertheless, one cannot say that it is completely immune from uncertainty beyond the federal republic....

CONTEXT AND TRENDS

The Swiss economy and its companies are well funded and so, as usual, the market remained stable. Nevertheless, one cannot say that it is completely immune from uncertainty beyond the federal republic. "At the moment, volatility in the market is bigger," one partner says. "On Monday and Tuesday, we speak of the crisis. By Friday, everyone is euphoric and then we go back to the start." For example, the United States of America continues to exert pressure on the country accused of aiding Americans evading taxes. "Switzerland fell over. The US probed and Switzerland fell over," one partner says. "The US did not expect us to fall over so quickly and heavily." Clearly, it seems that practitioners are starting to feel the effects of the tougher stance taken by regulators as they prepare sweeping new rules for the conventionally permissive private wealth management, investment banking, alternative investment and shadow banking industries. In fact, it appears as if the long awaited consolidation of the private banking sector is starting to materialise. "Smaller banks could be targets for acquisitions because they can't afford to comply with all the requirements," one partner says. Moreover, this year, the 270 year old private bank, Wegelin & Co was indicted by the US on charges of hiding over $1.2 billion in assets. As a result of US investigations and the actions of Swiss regulators, one development sees financial institutions dedicate significant amount of resources into internal investigations. Besides this, generally in finance, we have seen the incidence of combined deals, where a company will, for example, combine a private placement with bank debt. We have also witnessed a revival in securitisations, large project finance transactions involving Swiss companies and inbound corporate lending.

Compared to surrounding jurisdictions, the M&A market in Switzerland has been quite healthy. However, it is clear that activity is driven by the mid-market. "In general, in 2009 and 2010 it was very slow. In 2011, we felt it really picked up but things are slow in the big ticket market," one practitioner says. In truth, with the strength of the Swiss Franc taken into consideration, the fact that Switzerland is presently a buyer's market has surprised some practitioners, as Japanese investors look towards the technology market. "You might think that Swiss targets are expensive. You'd think it'd be the other way round with people using the Swiss Franc to acquire outside," one partner says. "But we've noticed activity from the Far East; less so India. Japan is strong. The Yen itself is strong and they don't see Switzerland as expensive." Additionally, private equity is picking up with deals advancing beyond the planning stages. Nevertheless, again the mid-market is strong as the mega-deals continue to go through a lean patch.

There is no change to speak of on the legislative front of restructuring and insolvency, however, parliament is debating amendments to the restructuring law. "We've seen it in first draft," one partner says. "It draws on the experience of Swissair, for example. It's not a completely new law, but it's at an early stage just to make things more efficient. There was a big discussion last year whether it was worth doing it and it was agreed that we should enter the debate. The earliest date for the new law is 2014." In the market itself, an interesting financial phenomenon is taking shape as the strength of the Swiss Franc is having a detrimental effect on export driven companies and it seems unlikely that the problem will go away. In terms of cases, most notably, the Swiss oil refiner, Petroplus, filed for insolvency proceedings after the failure of agreements to extend deadlines on loan agreements. Additionally, the insolvency of Lehman Brothers continues to generate huge amounts of work for Swiss firms. "It is one of the biggest insolvency cases that Switzerland has ever had, amount wise and not creditor wise," one practitioner says. Finally, when it comes to legal practices of restructuring and insolvency in Switzerland, there are two types: the first concerns the banking and regulatory advice involving loan restructuring in the pre-bankruptcy stage and the second involves the administrator work, which is specialised for fear of conflict.