Taxes and M&A Deals - dummies

By Bill Snow

Taxes are the bane of doing deals. Yeah, they’re a necessary evil, but of all M&A deals that ultimately don’t close, taxes are the number one reason for the failed transaction.

In the not-too-distant past, the U.S. tax code contained more than 4 million words and almost 200,000 lines of rules, regulations, exceptions, exemptions, thinly veiled threats, overt threats, twists, turns, and a writing style that can make your eyes glaze over in massive pronoun confusion.

Oh, and just for good measure, the code tosses around arcane and bizarre language like a sailing vessel slammed by a rogue wave of bureaucratic tomfoolery. So you definitely need the advice of a tax expert.

Sellers are often unaware of the full effect of the taxes their sales generate, so having a tax expert on the team helps insure the best-possible tax treatment of the transaction.

The issue of taxes straddles the expertise of the attorney and the accountant. Ideally, Seller works with an accounting firm that is large enough to have a dedicated tax expert on staff.

Tax evasion (not paying taxes owed) is illegal. Tax avoidance (merely avoiding transactions or structures that trigger taxes or higher taxes) is not.