On Transition.

One hundred sixty-eight thousand companies will cross the threshold of succession by 2030. The franc has appreciated by fourteen percent against the dollar, yet European buyers have reached a historic peak of one hundred four inbound transactions. Beneath the surface, two anti-avoidance rules-`Liquidazione Parziale Indiretta` (Indirect Partial Liquidation) and `Trasposizione` (Transposition)-continue to reclassify as taxable income what entrepreneurs believed to be an exempt capital gain. The following report analyzes these forces.

The environment in which a company's sale is negotiated is inseparable from the macroeconomic climate of confidence. Between late 2024 and spring 2026, the Swiss economy navigated conflicting currents, maintaining a trajectory of moderate growth and substantial labor market resilience.

Aggregate data indicate that Swiss Gross Domestic Product recorded an increase of 0.2 percent in the third quarter of 2024-a figure which, despite slowing from the +0.4 percent of the preceding quarter, confirms the system's capacity to avert the recession that affected neighboring European economies. This resilience was significantly propelled by exceptionally sustained activity in the construction sector, marking a +0.8 percent gain in the same period. The labor market proved remarkably solid, with an annual increase in the number of jobs of 1.2 percent-equivalent to approximately 65,800 new units in the same quarter.

Disaggregating by sector, however, reveals clear signs of fatigue concentrated in export-oriented manufacturing. The mechanical and electrical engineering and related technology sectors-the so-called MEM sector, crucial for Swiss exports-experienced a phase of marked uncertainty, registering a turnover contraction of 4.2 percent year-on-year in the first three quarters of 2024, heavily influenced by the slowdown in global economic conditions. The Purchasing Managers' Index calculated by Raiffeisen for SMEs fell to 50.1 points in November 2024, narrowly missing the technical contraction threshold.

Volatility swept through late 2025. The KOF global business indicator settled at 10.9 points in December 2025, down one point. This aggregate value concealed a profound dichotomy: on the one hand, a severe decline in financial services and manufacturing; on the other, slight improvements in the construction and retail trade sectors. Economic geography also showed divergent developments, with a more pronounced deterioration in Central and Eastern Switzerland, the Mittelland, and the Northwestern region, against a comparatively more stable situation in the Lake Geneva region and Canton Ticino.

Despite these winter turbulences, spring 2026 marked a vigorous rebound in confidence. In April 2026, the Swiss manufacturing PMI index surged to 54.5 points, a sharp increase from 53.3 in March, moving away from the stagnation zone and settling above the long-term historical average (53.4 points since 1995). Manufacturing employment grew, improving by 1.6 points; delivery times improved; but input prices recorded a worrying jump of 4.3 points, rising to 55.8. Cost pressure remains the true alarm bell for SME margins.

Adding to this picture is a growing operational criticality: cybersecurity. Approximately four percent of Swiss SMEs-corresponding to over twenty-four thousand enterprises-have suffered severe cyberattacks within a single triennium. This vulnerability mandates more rigorous technological due diligence in acquisition processes and reduces the appeal of companies that have not adequately invested in modern IT infrastructures.

2024 had closed with a quarter's retreat in the number of transactions. 2025 reversed the trend: the total volume of transactions involving Swiss companies exceeded 163 billion US dollars, the highest result recorded since 2018.

The figure appears even more surprising considering the adverse currency context. In the same period, the Swiss franc appreciated by fourteen percent against the US dollar. Classical economic theory would suggest that a strong currency acts as a deterrent to inbound acquisitions, making target companies significantly more expensive for international buyers. In the reality of 2025, the opposite occurred: the franc's strength reinforced Switzerland's perception as a stable and predictable market environment, attracting investors willing to pay a premium to mitigate risks present elsewhere.

Descending from the multinational level to the SME segment, data confirm the upward trend. After two years of decline, the market dedicated to Swiss SMEs recorded a substantial recovery with 208 transactions completed in 2025-an increase of sixteen percent year-on-year, bringing volumes close to the historical highs of 2021.

The main driver of this recovery was not domestic consolidation, but rather a massive influx of foreign capital. Half of all buyers of Swiss SMEs resided outside national borders, setting an absolute record. Inbound acquisitions reached a historic peak of 104 completed transactions, a sixty-five percent jump compared to 63 in the previous year. While the propensity for acquisition by US entities saw a drastic reduction, institutional and strategic investors from continental Europe filled the void. Domestic transactions also showed signs of awakening, growing by ten percent to 53 operations.

Driving this transactional frenzy was largely the Private Equity industry. With liquidity awaiting deployment-the so-called dry powder-estimated at unprecedented levels of 435.5 billion euros in Europe alone, the urgency to deploy capital into assets capable of generating stable returns became pressing. In the Swiss market, Private Equity funds completed 142 transactions for a volume of 46.2 billion dollars, confirming their role as a counterparty in twenty-eight percent of all Swiss M&A operations. The share of Private Equity-led deals continues an ascent that, from 20.6 percent in 2022, settled as a driving force in 2025-a sign of the profound professionalization of the divestment market.

Capital allocation in the Swiss M&A market in 2025 was not homogeneous. It polarized around specific technological and industrial axes, with a clear dichotomy between transaction frequency and the financial volume generated.

As the data reveal, the TMT sector led the market by number of transactions-84-but generated a contained financial value, indicative of fervent activity in the small technology enterprise segment. Conversely, the pharmaceutical sector absorbed the majority of capital: despite 74 transactions, it generated a monumental volume of 53 billion dollars, surpassing the 40.7 billion of 2024. The traditional manufacturing sector slipped from first to third place by volume-a sharp reduction compared to the previous year.

This sectoral heterogeneity is reflected in the valuation multiples applied to SMEs undergoing acquisition. Companies active in the healthcare, medtech, and pharmaceutical sectors-CRO, CDMO, biotechnology-command premium valuations, trading at multiples ranging between 10.1× and 11.4× EBITDA. Such valuations are often supported by early-stage financing linked to licensing rights and intellectual property.

The situation is diametrically different for SMEs in traditional industrial markets, basic software, and manufacturing. For these entities, market averages indicate structurally lower and more prudent multiples: the recorded data propose EBIT multiples in the order of 8.1×, EBITDA multiples around 7.6×, while multiples applied to net turnover hover around 1.2×. The mechanical application of these multiples also accounts for an illiquidity penalty and a discount related to dimensional scale compared to listed companies.

While M&A volumes indicate a healthy market, the very foundations of Switzerland's entrepreneurial fabric are subjected to unprecedented demographic stress. These are not isolated cases; rather, it is a generational shockwave involving hundreds of thousands of jobs.

The 2026 Business Succession Study, developed in collaboration between UBS Switzerland AG and the Center for Family Business at the University of St. Gallen, offers the most exhaustive mapping of the phenomenon. Currently, thirty-two percent of Swiss SME owners have expressed a firm intention to sell their enterprise-or majority stakes in it-within a five-year horizon. This figure evidences a dizzying acceleration: the intention stood at twenty-nine percent in 2009, fell to twenty-two percent in 2013, and to twenty percent in 2016.

The determining factor is age. Among young entrepreneurs, between twenty and forty-five years old, the intention rate is confined to ten percent. Among entrepreneurs who have reached or surpassed retirement age, the percentage of those seeking an exit approaches fifty percent. The urgency is imminent: approximately eleven percent of entrepreneurs have planned the transfer within two calendar years.

Applying statistical correctives based on past experience, researchers introduced the concept of a transfer rate-the proportion of transfers actually realized-prudently estimated at sixty-five percent of declared intentions. Multiplying the intention rate by the realization rate yields an impressive macroeconomic deduction: 20.8 percent of all Swiss SMEs are projected to concretely change ownership and management by the end of 2030. Translated into absolute figures, this means approximately 168,000 companies will cross the threshold of succession within a few years.

The potential destruction of value caused by inertia is severe. Approximately fifteen percent of current owners see no other exit than the definitive closure or liquidation of assets-a percentage that rises dramatically with advancing age. In support, analyses by the independent KMU Next foundation indicate that, historically, one in three Swiss SMEs disappears from the market solely due to the inability to find a suitable buyer. Abandoning the business represents a formidable waste of resources, especially considering the system's comparative efficiency: the five-year commercial survival rate for an acquired company stands at a solid ninety-five percent-a level immensely superior to the fifty percent survival probability associated with new enterprises founded from scratch.

An acquired company survives five years in ninety-five percent of cases. A new foundation, in half that value. Continuity is not a random variable: it is an outcome of architecture.

§ The Mandate · No. 04

Sociologically, SME succession is undergoing a metamorphosis. The pure dynastic model, based on father-to-son transfer, remains the most widespread practice but is losing its exclusivity in favor of alternative solutions.

Many legitimate heirs prove reluctant to assume entrepreneurial risk or direct operational responsibilities. According to the Schweizer Erbschaftsstudie 2023 survey, although almost forty percent of respondents declare a desire to continue the business if inherited, approximately one-third would limit themselves to a shareholder role, delegating management to an external professional CEO. The option of liquidation or dissolution of the inherited company is considered unacceptable, making a total sale the preferred variant when there is no managerial interest.

The Management Buy-Out (MBO)-the acquisition of the company by employees or management members without blood ties to the founder-has carved out a fundamental space, covering approximately one-quarter of business continuity solutions. The professionalization of this formula is one of the most significant phenomena of the period.

The data on legal forms is particularly explanatory. Sole proprietorships are the most fragile-with over one-fifth lacking a solution-because personal and business assets are merged, making divestiture complex at an accounting and tax level. Enterprises structured as capital companies, particularly Limited Liability Companies (Sagl), show almost halved critical rates (9.8 percent), demonstrating that the proactive institutionalization of governance drastically reduces transactional friction. It is no coincidence that primary recommendations from fiduciary consultants suggest the proactive conversion of sole proprietorships into capital companies-subject to overcoming the five-year prohibition period before divestiture.

The UBS/PwC survey exposes the systemic undervaluation of transactional complexity. Twenty-eight percent of entrepreneurs who declare the intent to transfer their company within five years admit to having taken no concrete action. Only eleven percent have implemented and completed a formal succession process. Almost half have not even begun the strategic reflection phase, and fifty-two percent have no potential successor in mind. This sluggishness clashes with the market's physiological timelines: consulting firm BDO and Dun & Bradstreet data indicate that a complete process requires an average of 6.6 years of work-the issue should be introduced into governance as soon as the entrepreneur turns fifty-five.

The first major negotiation barrier is the valuation gap. Half of entrepreneurs claim to have an exact idea of their company's value. The University of St. Gallen calculates that a structural thirty percent overestimation by the seller exists, generated exclusively by an emotional premium for work performed. In negotiation rooms, this gap relative to the true market economic value translates into the systematic failure of letters of intent, preventing the meeting of supply and demand-even in strictly family contexts.

The second barrier is structural: seventy-eight percent of current owners personally founded the company. Beyond lacking prior experience as sellers, they have built operational models entirely centered on themselves. Seventy-six percent candidly admit that commercial success and the resilience of client relationships vitally depend on their daily presence. This key-person dependency destroys the company's appeal in the eyes of financial investors or external successors, who fear acquiring an empty shell once the entrepreneur departs.

Once valuation and psychological hurdles are overcome, company sales encounter a regulatory and tax framework of utmost complexity. The lack of meticulous tax planning can erode almost the entirety of the economic value built by the entrepreneur.

The fundamental principle that makes the Swiss market attractive to resident sellers is the ordinary exemption on capital gains. When a physical person residing in Switzerland sells shares or stock of their company-Public Limited Company (Società Anonima) or Limited Liability Company (Sagl)-held in private assets, the capital gain derived from the sale (the difference between the price received by the buyer and the historical nominal value of the shares) is not subject to income tax. The proceeds are, in principle, tax-free. Conversely, regularly distributed dividends from the company are considered asset yield and are therefore subject to both withholding tax and ordinary income tax.

This marked fiscal imbalance has, over time, led to the emergence of evasive practices. Many entrepreneurs, in collusion with buyers, structured highly engineered transactions to extract profits in the form of exempt capital gains instead of distributing taxable dividends. To curb the erosion of tax revenue, the Federal Tax Administration (AFC) introduced two draconian anti-abuse rules: `Liquidazione Parziale Indiretta` (Indirect Partial Liquidation) and `Trasposizione` (Transposition). Both can effect a retroactive tax reclassification, transforming exempt capital gains into taxable asset income subject to the progressive income tax rate of the seller.

Indirect Partial Liquidation is the most insidious risk in modern Share Deals, particularly in operations orchestrated by Private Equity or in acquisitions where the buyer establishes a dedicated corporate vehicle. The risk is asymmetric: the culpable action is committed by the new buyer, but the tax bill is paid by the former owner.

The mechanism is triggered when the acquisition operation is financed through the improper use of the company's existing liquidity. The sequence is precise: the seller alienates a share package equal to or exceeding twenty percent from their private assets to the commercial assets of the acquiring entity. To meet the payment price, the buyer incurs a debt-typically a bank loan or a vendor loan. At this point, the legal snare intervenes: if the buyer, within a critical timeframe of five years from the contract signing, decides to withdraw liquidity or distributable reserves from the target company-funds not necessary for operations and already present at the time of closing-for the sole purpose of repaying the installments of the debt incurred for the acquisition, an indirect partial liquidation occurs.

The tax authority interprets the maneuver as a draining of the company: it deduces that the seller surreptitiously sold the liquidity itself to the buyer, allowing the buyer to use those funds to pay the share price. Consequently, the Administration proceeds to retroactively tax the drained funds as if they were a dividend directly received by the seller before divestiture, bringing a heavy tax axe down on the unsuspecting former owner's income.

Since post-closing behavior is beyond the alienator's control, the legal architecture of the operation requires extreme caution. M&A specialized lawyers contractually insert rigorous indemnity clauses-non-depletion clauses-within the Share Purchase Agreement. Such guarantees legally oblige the buyer to refrain from distributions of pre-existing capital for five years, or, should they do so, require them to jointly compensate the seller for every penny of tax damage caused by the Federal Tax Administration (AFC) investigation.

Transposition is a second reclassification scenario, typically triggered during family restructurings or preparatory holding company formations. It intervenes when an entrepreneur sells privately held shares of their operational SME to another capital company-for example, a holding company-in which they themselves hold a shareholding of five percent or more. If, in this internal transfer, the entrepreneur is paid a price exceeding the sum of the nominal share capital and capital contribution reserves of the transferred company, the difference is immediately taxed as taxable income.

The repercussions of pricing in non-competitive scenarios should not be underestimated. In Management Buy-Outs, the exiting entrepreneur often sells the company to long-standing executives at a patently favorable price. The tax administration and social security institution can intervene by reclassifying the difference between the estimated market value and the preferential price paid by the executives not as an act of liberality, but as a salary bonus-triggering substantial retroactive social contributions and income taxes for the buyer and the company. Likewise, if exorbitant indemnities for non-competition clauses are included in the divestiture contract, or if the seller is retained in the company with oversized consulting contracts, the administration will proceed to reclassify part of the original price as pure taxable employment income.

Observing the Swiss landscape through a geopolitical and regional lens, Ticino emerges not as a periphery, but as a crucial strategic node for the cross-border M&A market-particularly for the expansion of the Italian mid-market.

The fabric of Italian SMEs is undergoing an era of vigorous domestic consolidation and audacious foreign expansion. Family businesses on the peninsula, aware of their scale limitations in fragmented markets such as logistics and manufacturing, view acquisitions as the primary lever to ensure resilience. Acquiring a Ticinese SME does not merely represent supply chain integration: it constitutes access to the Swiss market through linguistic proximity and-even more significantly-allows for the positioning of corporate treasury and operations within a jurisdiction with an extraordinarily liquid banking system and a safe-haven currency like the Swiss franc.

The cross-border propensity is fueled by recent global supply chain crises-tensions in the Red Sea, instability of Asian freight rates-which have imposed the paradigm of regionalization and nearshoring. The logistical system of the Insubric axis is redefining itself to support shorter and more secure value chains. Italy saw institutional investments in industrial and logistics real estate reach eight hundred million euros in the first half of 2025 alone, with a rental take-up of nine hundred fifty thousand square meters driven by manufacturing and 3PLs. In this network of traffic towards Northern Europe, the Ticinese hinterland, and particularly the Mendrisiotto, acts as a strategic valve for sorting and value-added warehousing.

A second engine of attraction is the commercial potential inherent in the Swiss origin brand. The application of the Swiss cross or the 'Swiss Made' designation guarantees an irreplaceable premium pricing for products in international markets. The federal legislation governing 'swissness' is rigorous: to display the mark, a food product must contain at least eighty percent of the weight of its ingredients from Swiss origin, while in watchmaking and industrial products, the cost share of Swiss components must be at least sixty percent. A foreign company cannot simply establish a shell subsidiary. Through the direct acquisition of a productive SME historically rooted in Ticino, the foreign buyer assimilates not only the client base but simultaneously inherits the compliant supply chain, regulatory expertise, and prior rights necessary to leverage the brand's authority globally.

The Ticinese cantonal authorities have taken resolute legislative steps to fluidify the internal and cross-border M&A market, counteracting the succession inertia that threatens approximately 5,500 companies in the Canton. An emblematic example is the reform of the Cantonal Tax Law (Legge Tributaria), approved by the Grand Council and effective January 1, 2024.

Until 2023, cantonal jurisprudence discouraged Management Buy-Outs. A founder wishing to sell the company to a talented non-blood-related manager faced an inheritance and gift tax rate of 27.6 percent-a class four classification, for non-relatives. Such a drain annihilated the business case for the rising manager. With the introduction of the new Article 156a of the cantonal regulations, the Ticinese legislator established a fifty percent exemption on inheritance and gift tax specifically dedicated to business transfers aimed at preserving business continuity. This measure halves the fiscal entry cost for new executives and aligns legislation with sociological needs that see the traditional family withdraw from operational management.

Resonating this is the activism of the local consulting ecosystem. The Chamber of Commerce of Canton Ticino (Cc-Ti), in synergy with systemic institutions like BancaStato, has implemented permanent working groups to educate entrepreneurs on the implications of the new taxation and the methods for structuring transfers. Fiduciary and legal firms active in Lugano and Mendrisiotto have sophisticated their technical, fiscal, and legal due diligence services, providing quality standards typical of investment banking but tailored to the needs and budgets of the small-cap market.

The morphology of the Swiss market for mergers, acquisitions, and divestitures in the SME segment is experiencing a moment of absolute fervor and combined vulnerability.

Record data on inbound transactions in 2025 attest to an indisputable supremacy of the Swiss jurisdiction's attractiveness: the franc's solidity, manufacturing excellence, and the strength of the Swiss Made brand brilliantly overcome entry costs, serving as a magnet for European Private Equity and cross-border industrial operators.

In this scenario, the most severe paradox is dictated by internal demographics. The macroeconomic prospect that over twenty percent of Swiss enterprises will be obliged to change ownership by 2030 represents a stress test for the country's legal, financial, and psychological infrastructures. The thirty percent valuation gap between sellers' emotional demands and market rationality, coupled with managerial inexperience in ownership transfers and the threat of devastating tax reclassifications-`Liquidazione Parziale Indiretta` (Indirect Partial Liquidation) and `Trasposizione` (Transposition)-in the event of flawed contractual architectures, constitutes a minefield that continues to cause the evaporation of almost one-third of SMEs put up for sale.

The system's response to this emergency is shaping up not through centralist interventions, but through regional and market dynamism, of which Canton Ticino stands as an exemplary leader. The foresight to reduce punitive tax rates for succession to non-blood-related employees through the 2024 reform, combined with targeted strategies to intercept logistical nearshoring flows from Northern Italy, positions southern Switzerland as an ecosystem where business transition is ceasing to be a hereditary trauma and evolving into an institutionalized industry of human and financial capital turnover.

The evidence leads to the assertion that, in perspective, success in the Swiss M&A market will reward entrepreneurial entities capable of depersonalizing their operations in a timely manner, adopting suitable corporate structures to overcome prohibition constraints and to engage openly, through fiduciary professionals, with a capital market increasingly hungry for resilience.

Sources are listed by thematic cluster, according to The Mandate's editorial convention. References are not numbered in the body of the text to preserve reading flow.

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