Tax liabilities can give rise to tax complications when dealing with mergers and acquisitions.
For example, you may inadvertently trigger a tax liability if the IRS decides that parachute clauses paid to departing executives are excessive.
Or your income may be subject to higher taxes if you consolidate operations in a less favorable tax locale than your previous locations. In addition, merging employee stock option programs can potentially have tax implications for your company and its employees.
About 18 percent of the CFOs who reported M&A plans for 2015 in the recent Duke University/CFO Magazine Global Business Outlook survey will target foreign companies. International mergers and acquisitions can create tax nightmares, especially if your in-house accounting personnel are unfamiliar with the tax laws in the seller’s country.
Consequently, just because you’ve resolved tax issues when negotiating your deal, it doesn’t mean you’re finished. Proactive tax planning can prevent costly post-closing tax surprises that arise as you integrate the combined businesses and address various accounting issues. A valuation professional with M&A experience can help you navigate through all the stages of your deal — even beyond the closing date.
Tax complications are not the only challenge faced when dealing with mergers and acquisitions. There are also integration and accounting issues to consider.