The question is in the title ^^"

What happen if I lost on the battlefield =\?

and How can I choose my pets ?

If someone defeats you on the battlefield your squad retreats, this means it will go to a empty field next to where you was standing. If there is no empty field around you the Squad will be return to you (it will be kicked off the battlefield)

What exactly do you mean by choose your pets? If you want to create a Squad you need a millitary academy, than you choose four pets you want sent to the battlefield and dump them in a group together (only these four pets in one tab) then you can upgrade this group to a Squad (+)