A tag-along right (or co-sale right) is a shareholders' agreement clause giving minority shareholders the right to sell their shares on the same price and terms as the majority shareholder when the majority sells their stake to a third party. It protects the minority against the risk of finding themselves partnered with an unknown new majority shareholder whose intentions and governance practices are uncertain.

In practice: if shareholder A (60% of capital) sells their shares to a third-party buyer at CHF 200 per share, the tag-along gives shareholder B (40% of capital) the right to require the acquirer to also purchase their shares at CHF 200 per share, on the same contractual terms. The acquirer must therefore agree to purchase 100% of the capital if they want to acquire the majority's 60% — which can be a significant constraint in certain transactions.

Tag-along and drag-along are the two faces of share liquidity in a shareholders' agreement: the tag-along protects the minority (right to exit), the drag-along protects the majority (right to force exit). They are almost always negotiated together in LBOs, fundraising rounds and Franco-Swiss joint ventures.

Example: in a Franco-Swiss BIMBO, management (35%) benefits from a full tag-along on PE fund (65%) disposals. When the fund receives a trade buyer offer at CHF 18.0 million for its 65% stake (100% valuation = CHF 27.7 million), management exercises its tag-along and sells its 35% to the acquirer for CHF 9.7 million — on the same price and warranty conditions.

At Hectelion, we negotiate tag-along clauses in Franco-Swiss shareholders' agreements, ensuring the balance between minority protection and investment structure attractiveness for investors.