The reasons for high failure rate (ca. 50 %) of all M&A transactions are first of all insufficient analyses of the businesses to be acquired and the failure to integrate it in the acquirer's group of companies after the completed transaction. We therefore recommend our clients to conduct a tax due diligence exercise in the preliminary stages of an M&A transaction, in addition to the usual due diligence exercises (financial, legal and environmental). It will help to identify tax risks and consequential effects on taxation, which can be taken into account in the process of planning the acquisition structure under taxation aspects. But also the early identification of deal breakers or the recommendation to rather choose an asset deal (purchase of individual objects or rights) instead of the originally intended share deal (purchase of shares) may help a potential acquirer to save considerable costs.
In addition to identifying tax risks and taking them into account for determining the purchase price or in corresponding warranty agreements we place strong emphasis on recommendations for structuring under tax aspects. At this stage, a potential acquirer may still influence the future tax burden of the transferring entity and its shareholders – in our opinion, this is an opportunity that should be seized by all means.
Overview of our services
- Obtaining tax-relevant information from the seller using detailed checklists
- Password-protected and protocolled access to the Trinavis DATAROOM for a safe data transfer
- Review of the transaction agreements to be concluded from a taxation perspective and phrasing tax clauses for the transaction agreements to be entered into
- Clarification of the taxation effects resulting from the actual acquisition process (such as loss of loss carryforwards)
- Identification of incorrect tax filings in the past ('tax audit risks') and exact quantification of the resulting tax risk
- Description of the consequential effects on taxation in case of treatment in conformity with tax law (such as requirement to reverse write-downs to going-concern value made in previous years)
- Drafting investment strategy proposals under taxation aspects
- Clarification of the taxation effects of different financing models
- Clarification of the taxation effects of a re-sale
- Presentation of the due diligence results in a well-structured report
- 'Red Flag List' – listing of essential risks and recommendations for action