Planning mergers and acquisitions can often feel like the corporate version of a high-wire act: Get even one detail wrong, and the deal’s hoped-for value realization can take a tumble. And there’s no safety net that allows for a do-over.
Adding to the high-stakes challenge: The copious details of M&A transactions are also getting more and more complex, and that’s especially true when it comes to tax concerns—an essential part of every deal, but one that is often overlooked or parked at the end of the transaction. Tax rules—local, federal, global—continue to change on a regular basis, including the introduction of new technologies and evolving laws and regulations.
Given today’s volatile, always-changing business climate, leaving the tax team to “wrap up the details” at the end of a transaction is just not sustainable. In our work with clients, we’ve learned that giving the chief tax officer (CTO) a seat at the table throughout the deal process is an essential component of a successful transaction, as we outline in our new report, “Tax in today’s complex M&A market.”
Putting tax considerations first
M&A transactions are traditionally led by the chief financial officer (CFO), with good reason. But in our engagement with clients on global M&A activity, having both the CFO and the CTO involved from the start, regularly communicating and seeing all of the same data, is critical.
This team-based approach from Day 1 can streamline the execution process itself, but it can also improve efficiencies post transaction and increase actual value realization. There are tax implications at each defined deal phase, and especially when transactions involve multiple state and international borders. Here are some examples:
Transaction identification: Predeal tax structuring, contract negotiation and terms
Evaluation: Tax due diligence, tax modeling and structuring
Signing/acquisition: Final tax terms, modeling and structuring
Integration/separation: Exit planning, additional modeling, postdeal tax services
Value realization: Ongoing tax models and structures, postdeal services
Above all, buyers should be cognizant of tax issues early so they can identify and take care of any risks that might cross their path. And the potential issues and risks are getting more complicated for many companies, according to our recent survey of CTOs, with serious ramifications for M&A activity. Indeed, two-thirds of the experts we surveyed said tax issues related to M&A are growing in number and complexity, but just half of the CTOs felt like they had good connectivity to their company’s M&A activity.