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M&A Tax Talk

Insights on trends and recurring matters regarding US tax topics in M&A transactions

M&A often revolves around two organizations charting either a new path together or one that splits apart. Sometimes taking a wider view can be helpful. Our M&A Tax Talk series may help you see the bigger picture for your organization, providing you with insights to move forward with confidence throughout the M&A life cycle: strategy, readiness, execution, closing, and post close.

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Check out our other M&A Tax Talk series:
M&A Tax Talk: Navigating M&A during a recession miniseries
M&A Tax Talk: Private equity insights

Cash tax forecasting simplified

March 2022

A dynamic tax forecast model allows for scenario analytics and decision-making in a fast-moving transaction process. Such a forecast validates tax elements of the broader deal thesis–positioning the company for a well-informed purchase price and for post-closing enhancement and integration. Preparing such a forecast of a target’s cash income taxes does not need to be a daunting or burdensome task, using the framework in this article as a guide. 

Global trade considerations

December 2021

As global trade operations become more complex and strategically important to international supply chains, they also impact various facets of mergers and acquisitions. In this article we explore the importance of understanding the current and future global trade requirements in PMI or divestiture projects in order to allow sufficient lead time to address government and business requirements, enable overall business continuity, and add incremental value in the transformation.

Tax Factbooks

August 2021

In the evolving M&A marketplace, we are seeing Tax Factbooks as a pre-sale tax preparation option that may increase the efficiency of the tax diligence process. In this article, we discuss what a Tax Factbook is, where we see them in the marketplace, the benefits of having one prepared, and how a Tax Factbook differs from vendor due diligence.

State tax insights on debt

June 2021

As a business is evaluating the use of debt and interest within the structure of a US group, state tax implications can vary and may require additional consideration. In this article, we examine how taxpayers can avoid adverse tax consequences by evaluating certain issues such as debtor identity and the differences between state and federal filing requirements, challenges in allocating existing debt, and the benefits of a co-obligor on a debt instrument.

Right as rain–Overview of the UP-C structure

March 2021

This article presents simple steps to assist organizations with their proactive planning, including implementation, the effects of exchange rights on legacy partners’ liquidity, methods to affect the exchange, and the tax receivable agreement. We focus on how the owners of pass-through legal entities can benefit from access to public capital markets, even while maintaining a single layer of tax and not being subject to publicly traded partnership rules.

Power shift, tax shift?

January 2021

A change in presidential administrations often signals the possibility of changes in tax policy and this is certainly true in the case of the current transition. President Biden has proposed modifying or repealing key provisions of the 2017 tax code overhaul known informally as the Tax Cuts and Jobs Act (TCJA, P.L. 115-97). This article provides a high-level overview of Biden’s proposed tax law changes to corporate and individual taxes and the potential impact on M&A transactions if such changes are enacted.

The case for estate planning pre-sale

November 2020

As taxpayers assess whether to sell a business, estate planning may be a key driver of the decision related to the timing and structure of a divestiture. This article examines the case for pre-sale estate planning and outlines external factors, including market volatility, historically low interest rates, and an all-time high estate tax exemption that may encourage business owners to be proactive with their estate planning. Proactive planning provides an opportunity to transfer long-term, life-changing wealth for one’s family in an organized and tax-efficient manner.

Debt modification tax rules

March 2020

Given the broad definition of “publicly-traded” under the tax rules, many debt instruments are treated as publicly-traded, including revolvers. This increases the likelihood that a “significant modification” of the debt would result in “phantom income” to the debtor company. If your company is modifying or restructuring existing debt, it is important that an analysis be performed to determine whether a “significant modification” has occurred and whether the debt is “publicly-traded,” as this could result in unexpected income inclusions for tax purposes.

Indirect tax considerations in M&A transactions in a post-Wayfair world

January 2020

The Wayfair ruling significantly changed when a state requires sales/use tax to be collected by remote sellers. This month we examine how the 2018 Wayfair court decision impacts buyers and sellers involved in M&A transactions. We’ll outline how the court decision impacts the determination of sales tax collection obligations and discuss sales tax considerations that should be addressed by both buyers and sellers.

Representation and warranty insurance

November 2019

The robust and competitive M&A market has led to an increase in representation and warranty insurance (RWI) policies, which has transformed the M&A process. This month we outline some of the key tax-related issues that RWI addresses, including its ability to protect a buyer against a seller’s breach of representation, and warranties included in an acquisition agreement. In addition, we’ll look at how RWI can help both buyers and sellers speed up – or even eliminate–the escrow process.

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Proposed regulations would significantly impact the value of tax attributes following an ownership change

October 2019

This month, we examine the proposed rule changes that could significantly limit a corporation’s ability to utilize net operating losses (NOLs) and other tax attributes following an ownership change.

Specifically, we’ll examine how these proposed changes could impact an organization’s tax burden and identify some potential actions NOL companies—and buyers of such companies—should consider to ameliorate the negative effects that companies could face following an ownership change.

In January 2020 the IRS issued significant revisions to the applicability date provisions of the proposed section 382(h) regulations.

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Divestiture-related tax considerations

September 2019

If you’ve ever sold a home, you know that preparation is key to achieving the best price. You make minor repairs, upgrade outdated appliances, put on a fresh coat of paint, and stage the home to make it attractive to potential buyers.

In many ways, selling a business is similar, except that your preparation is different. Specifically, it is critical to develop an understanding of the tax work that should be addressed in advance of starting negotiations.

Post-tax reform contracting considerations

July 2019

With the passage of the Tax Cuts and Jobs Acts of 2017 (TCJA), US taxpayers engaging in acquisitions and dispositions should evaluate additional contracting considerations for proposed transactions.

This is evident when drafting language in letters of intent (LOI) or purchase agreements regarding tax matters including the benefits of immediate expensing of acquired property, inheritance of transition tax liabilities, and how to treat net operating losses (NOLs) in the pre-closing period.

Check back each month as new editions of M&A Tax Talk are published or subscribe below to receive them straight to your inbox.

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