Vendor Assist Services and Tax Due Diligence
Buy-side and Sell-side transaction support
We analyse and quantify industry, country, and deal-specific tax risks and opportunities to assist clients in developing negotiating positions and assist in creating a competitive advantage in a bid.
Our Mergers and Acquisitions tax team delivers services to assist clients in preparing a business for sale and obtaining certainty over price. By involving tax early in the sale or purchasing process, we provide advice to manage deal structuring efficiently and cost effectively.
Vendor Assist Services
On the sell-side, an M&A Tax readiness review can assist you in the following ways:
- Assessing compliance with tax obligations and proposing risk mitigation strategies to assist in resolving matters before the due diligence process begins
- Understanding the tax impact of the proposed sale structure on sale price and ongoing post-sale operations (if applicable), including reviewing the debt and capital structure and transfer pricing matters
- Providing hands-on support through all stages of the sale process from establishing and executing a tax implementation plan, to advising on the tax implications of the sale and purchase agreement, and assisting with a review of tax balances in the completion accounts.
Tax Due Diligence
A vendor due diligence allows you to take control of the due diligence process and, if timed appropriately, can provide you with an opportunity to formulate and implement mitigation strategies with regards to identified tax risk.
An appropriately scoped tax due diligence is an important part of assessing a potential transaction and should be considered as critical as other key work streams (e.g. financial or legal due diligence).
Tax due diligence is fundamentally a process of identifying, analysing and assessing tax risks that may be inherited as part of purchasing a business (whether that is via a share or asset deal), or identifying tax risks that need to be managed as part of a sale process. We work with clients to confirm that tax risks identified in the tax due diligence work stream are managed through appropriate indemnities and warranties in the transaction documentation. Such protection may also take the form of escrow arrangements or purchase price adjustments.
The tax due diligence work stream also informs negotiations with warranty and indemnity insurers.
Scoping is a critical first step in a quality tax due diligence review. There are some fundamental considerations in scoping your tax due diligence for key risk identification including:
- Materiality level: Get buy-in from key-stakeholders in determining the materiality level to confirm that the due diligence will satisfy the requirements of each interested party
- Consider whether an asset or share deal is appropriate based on the current ownership structure
- Identification of risk areas, as influenced by the profile of the target
- Taxes to be covered: Generally this includes income tax for the open review period along with relevant indirect tax items depending on their importance to the target’s tax profile
- Consider scoping-down foreign jurisdictions that are not financially significant
- Ability to rely on a vendor tax due diligence report may result in the scope of a tax due diligence being reduced
- Working within a specific budget and timeframe will invariably result in a prioritisation exercise to determine which procedures should be undertaken.