Quasi-merger: an innovative strategy for real estate M&A

The quasi-merger concept

A quasi-merger is a specialised approach to M&A transactions where a shareholder of the target company contributes a stake amounting to at least 50% of the voting rights of their enterprise to the acquiring company. In return, the shareholder typically receives shares or equity in the acquiring company. This strategic move ensures that the acquired entity is not dissolved but continues to function as an autonomous unit within the overall corporate structure. The strategy is increasingly popular due to its ability to optimise tax efficiency and operational synergies.

Multiple advantages

Some of the benefits of quasi-mergers include:

• Tax benefits: quasi-mergers are often tax-neutral, particularly when certain transaction conditions are met.
  
• Operational synergies: consolidating real estate assets under a single organisation streamlines processes, achieves economies of scale and facilitates the sharing of expertise.
• Strategic collaboration: this opens avenues for diversifying real estate portfolios and more effectively penetrating new markets.

For shareholders holding their shares as private assets, a quasi-merger generally has no income tax consequences. The exchange of participation rights in companies in the case of restructurings or merger-like combinations is tax-neutral for a participating corporation, to the extent that cumulatively a) the tax liability in Switzerland continues and b) the values previously relevant for the profit tax are taken over,¹ bearing in mind that each case must be assessed considering all relevant facts and circumstances.

If the acquired company is a pure real estate company, this may trigger real estate gains tax, depending on the canton. However, provided that the merger is tax-neutral, the transfer of the real estate company in the context of a quasi-merger is also exempt from real estate gains tax.This tax advantage additionally increases the attractiveness of the quasi-merger.

¹ Source: KS 5a ESTV

Quasi-mergers in practice

Quasi-mergers can generally be implemented in a tax-neutral manner if:

• at least 50% of the voting rights of the acquired company are contributed, and
  
• payouts to shareholders shall not exceed 50% of the value of the acquired company, whether in the form of cash payments or loans.  

Note that tax consequences may arise if the acquired entity is absorbed within five years following the acquisition.

In the Swiss real estate sector, the quasi-merger concept is increasingly being utilised as a strategic tool for expansion and optimisation. Companies are seeking innovative approaches to enhance the value of their real estate investments, from commercial properties to residential complexes. As the trend gains momentum, industry participants are engaging legal and financial experts to structure quasi-mergers that fulfil their strategic ambitions.

Quasi-mergers represent a dynamic and forward-looking M&A approach in the Swiss real estate sector. In a country that consistently attracts investment and supports a robust real estate market, quasi-mergers offer an opportunity to redefine the industry landscape and enable innovative growth strategies. The adoption of the quasi-merger approach underscores Switzerland’s commitment to driving innovation and excellence in its real estate sector, even in the face of challenges posed by complex M&A transactions.