Don’t underestimate the tax impact of an acquisition

If your company wants to acquire another business, you’ll need to anticipate many challenges. To improve your odds of success, it’s important to devote resources to intensive tax planning before — and after — your deal closes.

During deal negotiations, you and the seller will likely discuss issues such as to what extent each party can deduct their transaction costs and how much in local, state and federal tax obligations the parties will owe upon signing the deal. Often, deal structures (such as asset sales) that typically benefit buyers have negative tax consequences for sellers and vice versa.

Tax management during integration is also important. It can help your company capture synergies more quickly and efficiently. You may, for example, have based your purchase price on the assumption that you’ll achieve a certain percentage of cost reductions via postmerger synergies. But if your tax projections are flawed or you fail to follow through on earlier tax assumptions, you may not realize such synergies.

Negative tax consequences of an acquisition can haunt a company for years. Let us help you avoid them and identify tax benefits that can improve the acquisition as a whole. Please contact us for more information.

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