Merger auditor in Paris — Exchange-ratio and merger report

Merger auditor in Paris — report on the exchange ratio and the merger terms#

Are you preparing a merger-acquisition, a merger by formation of a new company or a demerger? Unless all shareholders unanimously waive it, the appointment of a merger auditor (commissaire à la fusion) is required under article L.236-10 of the French Commercial Code. The mission: issue a written report on the terms of the operation and verify that the exchange ratio (the parity) offered to shareholders is fair.

Hayot Expertise, a chartered-accountancy and audit firm whose principal is a French statutory auditor registered on the list maintained by the High Authority for Audit (H2A) and a member of the CRCC de Paris, is based at 58 rue de Monceau, 75008 Paris and works throughout France. We carry out the merger audit engagement and the underlying valuation analysis, in coordination with your lawyers. Request a quote within 24 hours or book a meeting.

The appointment is required for mergers and demergers, unless all shareholders or members of all participating companies unanimously agree to waive it.

Article L.236-10 of the French Commercial Code entrusts the merger auditor with a mission carried out under personal liability, in two parts:

1. A written report on the terms of the merger: it sets out the methods used to determine the exchange ratio, assesses their adequacy, the resulting valuations and any special valuation difficulties.
2. Verification of the exchange ratio: it confirms that the relative values assigned to the companies' shares are sound and that the exchange ratio is fair for shareholders, especially minorities.

Where the operation includes in-kind contributions or special benefits, a contribution auditor (appointed under article L.225-8) issues the report required by article L.225-147; the merger auditor may also handle it.

Our view. The merger auditor's report does not "block" the operation: it is not binding, and shareholders vote freely in light of its conclusions. Its value lies elsewhere: a solid report, grounded in several consistent methods, defuses parity disputes (often raised by minorities) and reassures banks and investors.

The merger auditor is appointed by court order: at the request of the participating companies, the president of the Commercial Court appoints the auditor. In Paris, the competent court is the Tribunal de commerce de Paris, 1 quai de la Corse, 75004 Paris.

The auditor must be a statutory auditor registered on the list maintained by the High Authority for Audit (H2A), the independent public authority that succeeded the H3C on 1 January 2024 (Ordinance no. 2023-1142 of 6 December 2023). The auditor complies with the independence and incompatibility rules of article L.821-31 (no conflict of interest with the participating companies) and is covered by professional liability insurance.

Waiver. Shareholders of all companies may unanimously waive the appointment of a merger auditor. A single shareholder's objection makes the appointment mandatory again.

Step 1 — Settle the merger plan#

The directors of the participating companies draw up the merger plan: valuations, proposed exchange ratio, legal, accounting and tax terms. The auditor's report covers these terms.

Step 2 — Court appointment#

At the companies' request, the president of the Commercial Court appoints the merger auditor by court order (article L.236-10). Absent a unanimous waiver, this appointment is mandatory.

Step 3 — Engagement letter and documents#

Scoping of the operation, timeline, fixed fees and list of documents: financial statements, draft merger agreement, business plans, valuations, key contracts.

Step 4 — Valuation and parity procedures#

Application of the CNCC technical opinion on merger audit engagements (December 2024): assessment of relative values, review of the methods used, cross-checks, analysis of intangible assets and latent liabilities.

Step 5 — Report#

The report concludes on the adequacy of the methods and the fairness of the exchange ratio. It is made available to shareholders of each company before the meeting voting on the merger.

Step 6 — Filing with the registry#

The report is filed with the Commercial Court registry and added to the legal file of the operation.

Take a merger-acquisition where Company A is valued at €10M and Company B at €18M. The gross exchange ratio is 10/18, i.e. 0.56 B shares for 1 A share. The merger auditor checks three points: that the €10M and €18M valuations are supported by appropriate methods; that the 0.56 ratio neither unduly favours nor disadvantages a shareholder group; and that ancillary terms (additional contributions, special benefits, timing) do not alter the real parity.

A merger may qualify for the favourable regime of article 210 A of the French Tax Code: tax neutrality, with deferral of capital gains on the assets transferred, subject to the undertakings given by the acquiring company. The transfer of the target's tax losses to the acquirer normally requires approval (article 209 II), granted under conditions. Merger deeds under the favourable regime are registered free of charge. A prior tax analysis, conducted with your adviser, is essential: this is often where the value of the operation is won or lost.

Fees are fixed, confirmed in writing within 24 hours of reviewing the file. The initial scoping is free. Request a quote.

1. Parity contested by minorities. A poorly justified exchange ratio is the leading cause of blockage and post-merger litigation. The auditor's report is, for minorities, the main guarantee of fairness: overlooking it invites a challenge.
2. Intangible assets and latent liabilities. Brand, client portfolio, technology, litigation, guarantees given: these hard-to-value items weigh heavily on parity. The auditor must objectify them.
3. Lost tax losses. Without approval (article 209 II) or appropriate structuring, the target's tax losses may be lost. Anticipating the tax angle avoids this waste.

• Statutory auditor registered with the H2A, authorised to sign the merger report, member of the CRCC de Paris, covered by professional liability insurance.
• Combined chartered-accountancy and audit firm: a coherent economic, accounting and tax reading of the operation without multiplying advisers.
• Valuation expertise: application of CNCC standards, multiple documented methods, neutrality towards the parties.
• Coordination with your M&A counsel and tax advisers to secure the timeline and the acquirer's undertakings.
• Transparency: fixed-fee quote within 24 hours, clear engagement letter, free initial scoping.