InsightsThe siren song of M&A in emerging markets
Mergers and acquisitions
All transactions - whether mergers, acquisitions, joint ventures, equity investments, or divestitures - involve complex issues requiring the dedicated attention of experienced professionals. When deals involve companies operating globally, wading through additional considerations can be daunting. Deloitte can help navigate the myriad of tax, accounting, legal, regulatory, cultural, and labor issues in cross-border transactions to help manage compliance risks and potentially enhance returns.
How we can help
Deal structuring and due diligence
Deloitte’s M&A professionals provide corporate clients and private equity investors with a spectrum of tax advisory services. Our multifunctional approach teams these professionals with industry and technical specialists to provide assistance and advice targeted toward managing tax compliance risk and enhancing business returns. We analyse and quantify industry-, country-, and deal- specific tax risks and opportunities; analysing asset quality; and potential hidden costs, contingencies and commitments and help to develop negotiating positions. We suggest alternative tax structures and prepare formal tax structuring memoranda and pro forma financial statements that illustrate the effects of various structuring alternatives on future cash flows and earnings.
We have a vast experience pool which we will utilise to negotiate the tax elements of deal agreements. Our M&A team have experience across all industry sectors and we will draw on our knowledge of dealing with contracts and agreements to ensure all taxation aspects of the transaction are dealt with.
We help analyse potential tax, accounting, labour, operational, and system issues before going to market. We work with clients to analyse whether the transaction structure is in line with company strategy, and quantify the strategic value of tax risks and opportunities. We perform pre-sale due diligence including analysis of tax financial and regulatory matters, review of compensation-related agreements, and analysis of information quality. We also know that the tax considerations of a deal can be simple or complex and will vary depending on the nature of the deal. We can assist and advise clients regarding estimated gains and losses, analyse the allocation and preservation of tax attributes, and explore tax structures that address clients’ goal for cash proceeds from the deal. Our professionals can help clients navigate deal execution and work closely with their team and other advisors to enhance efficiency of effort and knowledge transfer.
Post transaction services
For both acquisitions and separations, our team provides a holistic approach that can help tax departments address its Day 1 readiness needs as well as its longer term requirements. This includes advising on a variety of tax issues, such as addressing tax planning and compliance matters; simplifying corporate tax structures, especially where overlapping legal entities arise; harmonising accounting methods; and merging tax systems, processes, and departmental personnel. We work with the tax function to explore tax opportunities that arise as part of the company’s overall merger synergy efforts, whether those changes arise in supply chains, sales force organisation, back-office operations, or other areas.
Restructuring and bankruptcy services
We work with financially challenged companies by analysing relevant tax issues and financial considerations, assisting in evaluating restructuring options, and exploring planning opportunities that address those tax and financial burdens, while building a framework allowing for future tax efficiencies. Our professionals have extensive experience working with debtors, creditors, and creditor committees with respect to both in–court and out-of-court restructurings. We also work with clients’ other professional advisors to pursue favorable business and tax results.
Tax valuation services
As part of the M&A process, businesses are increasingly confronted with tax and valuation requirements. We have significant experience of dealing with tax valuations, including:
• Determining the value of an unlisted business, company or shareholding for tax purposes
• Liaising with Revenue to negotiate/ agree relevant valuations
• Valuation aspects associated with employee share option schemes
• Establishing the value of the intangible assets of an entity including goodwill
• Determining valuations for capital gains tax purposes including for rebasing purposes
• Allocating the purchase price between assets being bought or sold
Equity based awards
Based on a number of recent deals, a key area of focus which arises in many M&A transactions is the tax treatment of any share options/equity awards to management and employees. In many instances, share options are exercised just prior to a sale of the business thereby resulting in full income tax treatment for the individuals concerned.
With appropriate planning, particularly in circumstances where an exit by way of sale or IPO is envisaged, employees and management can be incentivised with more tax efficient equity or option arrangements ensuring that the level of after sales proceeds which they can realise on a personal basis is maximised. We have significant expertise in working with companies to design tax efficient equity based remuneration plans which complement the commercial objectives of the company.