When starting a business, planning the exit is a must. M&A or business exit planning is one of the most important aspects for a small business. It is however often overlooked by entrepreneurs eager to get started, or not updated as the business grows or changes.
Why M&A planning
Exiting a business, especially a foreign or international business, can have enormous tax consequences for the business owner. The key to a successful M&A is planning and preparation, in particular for an entrepreneur with no prior M&A experience.
Valuation is naturally the first and biggest concern a small business owner has when selling. However, the structure of the transaction itself is a key driver of M&A tax implications.
An asset sale for example could result in a less favorable tax treatment for the seller than a stock sale. A tax-free reorganization or merger also has specific tax consequences for the seller. Furthermore, selling to a foreign vs a domestic buyer has a different tax impact.
It is also important to understand how the valuation and purchase price allocation of the various intangible assets such as customer relationships, brand, goodwill, or non-compete, can affect the taxes of the buyer and seller.
Special M&A considerations for foreign companies
Selling a foreign company adds even more complexity to an already complicated, multi-layered process. An entrepreneur needs to understand, for example, the implications of selling assets in a foreign company, or selling a foreign company with tax deferred income in its retained earnings.
An experienced advisor can provide a business owner with an objective perspective, in addition to tax and structuring expertise.
Our M&A planning services
Business exit planning and M&A naturally become more complex for an international business. Whether the business is based in one country or a global business with many subsidiaries, we have the experience and partner network to ensure an effective and smooth transaction.
We work with the business owner to understand their goals and objective and help plan for US and other country tax implications through treaty analysis, case law and cross border transaction planning with our trusted partners across the globe.