M&A Taxes: The Types and Elements

M&A taxes: What are They?!

Mergers and acquisitions are the synergy of two separate businesses to become one entity for economic, social, or other reasons. A merger or acquisition is possible only when there is a mutual agreement between both parties. The agreed-upon terms on which these entities are willing to come together are known as an M&A deal structure. Hence, companies and agencies have originated that provide services tailored to this practice, namely M & A tax service.

Types of M&A Taxes

The M&A process deals with a bunch of different transactions, including mergers, acquisitions, consolidations, tender offers, purchase of assets, and management acquisitions.

  • Mergers: in a merger, the board of directors of two companies accepts the combination and looks for shareholders’ acceptance.
  • Acquisitions: in the simple acquisition, the acquiring company gains the majority of stake in the acquired company, which may not change its name or organizational structure.
  • Consolidations

This stage’s core role is the creation of a new company, and to do so core businesses are combined and the old corporate structures are abandoned.

  • Tender offers

In a tender offer, one company comes up with a purchase decision to pay for the outstanding stock of the other organization. As a rule, this specific price differs from the market price at that certain time.

  • Acquisition of assets: During this stage, one company directly acquires the assets of another company.
  • Management acquisitions

During the management acquisition (also known as a management-led buyout (MBO) stage, the company’s executives purchase a controlling stake in another company, while keeping it private.

M&A Tax Processes and Elements Included

M&A deals usually involve the following steps to make the process happen completely;

  • Developing an M&A Strategy: in this stage, the company sets up its goals for the M&A process.
  • Develop search criteria: to develop search criteria you can ask yourself some leading questions, such as;
  • In what financial condition should the target company be?
  • Are the target company’s goods or services supportive of your own?
  • Have you planned the maximum amount of money you can pay for an acquisition?
  • A long list of companies for acquisition

According to the answers to the questions above, you can easily develop a long list of companies that fit your criteria the best.

  • Contact target companies

You can contact and reach target companies either via intermediaries or personally. Contacting them helps you to understand the company owner’s interest in selling or entering a merger.

  • Perform valuation analysis

Based on the previous step, you’ll be able to value the company more in-depth and in detail, both from the operational and financial points of view.

  • Negotiations

Negotiation is the most important part for sellers and buyers. It helps each side to gain an understanding of the other and leads to compromise so that the deal happens.

  • Letter of Intent sending

And then we are on the Letter of Intent (LOI) writing stage, where you should provide a perfectly written offer for the company, including the terms and conditions of the deal and the conditions of payment.

  • M&A Due Diligence

Well-done due diligence is directly related to the success of your company. This includes an audit or investigation of the target company, its operations, human capital, tax and legal structure, and its financials.

  • Purchase and sale contract

In this stage, the buyer uses due diligence information to provide an informed purchase contract to the target company.

  • Integration process

And lastly, it’s important to take into consideration the integration process. The sooner it begins the better.

A Trusted Provider of M & A Tax Services

Leo Berwick’s team specializes in providing M & A tax services and is there to support you through all stages of a transaction, including once a transaction closes. The experts at Leo Berwick have decades of experience in advising sellers and buyers and may also provide personalized advice to help you better understand your objectives and achieve them more easily.

Leo Berwick offers the following services, and this list is not exhaustive;

  • Pre-Closing (Initial Planning, LOI, Financial Modeling, Tax Due Diligence, Tax Structuring, Legal Agreements included)
  • 75 Days Post-Closing (Elections, FATCHA, Working Capital, Tax Opportunities, Tax Filing Calendar, Remediate Exposures included)
  • Hold Period ( Co-Sourcing, Processes & Controls, Transaction Costs, Section 382, Tax Accounting, Tax Compliance included) services.

Leo Berwick’s primary focus is to become an integrated part of your organization, collaborate with your advisors, and work with you throughout the entire life cycle of the deal. So make you trust such an important process to professionals with experience and knowledge.

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