Tax Due Diligence

We assist sellers and buyers in identifying their preferred transaction structure based on their risk appetite and tax efficiency.


Why Tax Due Diligence is required?

With tax due diligence, you can maximise your merger or acquisition investment

Portrait of Mitigate Financial Risks
Mitigate Financial Risks

At the beginning of the decision-making for a merger and acquisition transaction, a target is identified, and a value is estimated with an estimate for the costs to complete implementation. A tax due diligence assists in providing clarity on potential tax liabilities and the proposed transaction structure.

It helps the acquiring company to identify the potential tax risks and opportunities associated with the target company. This process involves reviewing the target company's tax returns, financial statements, and other relevant documents to ensure compliance with tax laws and regulations.

Portrait of Maximise Value Creation
Maximise Value Creation

The tax due diligence process also helps the acquiring company to evaluate the tax implications of the transaction and develop a tax-efficient structure for the deal. This can include identifying tax credits and incentives that may be available, as well as assessing the impact of any potential tax liabilities on the overall value of the deal.

A seller looking to evaluate opportunities for negotiating the best price through improving the tax function, processes, and/or compliance can also benefit from tax due diligence recommendations.

Portrait of Indepth Tax Expertise
Indepth Tax Expertise

We understand that each party has a unique risk appetite and tax efficiency goals, which is why we tailor our approach to meet their specific needs. By analyzing the tax implications of different transaction structures, we help our clients make informed decisions that align with their objectives.

Whether its an asset purchase, share purchase, or merger, our team provides comprehensive guidance throughout the entire process. We work closely with our clients to evaluate the tax consequences of each option, taking into account various factors such as the type of business, industry regulations, and more. Our goal is to ensure that our clients achieve the best possible outcome while minimizing tax liabilities.

Tax risks uncovered and transaction structure optimised

Tax Due Diligence

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A detailed investigation of all the taxes that a business will be responsible for if it completes a Mergers and Acquisitions transaction is known as tax due diligence. It involves gaining an understanding of the target company's existing tax structure, and the tax implications of the transaction structure being proposed.

The tax due diligence not only identifies and mitigates risk, but it also recognises opportunities that may be explored. By analysing the trends in the market, the business will be able to ensure that they act on all types of developments and changes in the tax sphere. This will enable the opportunity for unrealized growth to be identified and plans of action can be put in place to take advantage of unrealised tax savings.

We can also increase the scope of tax due diligence process where there are any additional risks identified for example relating to any material contracts, management, issues, employee issues, possible litigation and corporate governance matters.

The due diligence process where tax is concerned, involves the following components:

  • Understanding the target's existing tax structure
  • Understanding the expected transaction structure
  • Reviewing the target's historical tax compliance
  • Identifying any historical tax exposures
  • The aim is to determine what responsibilities, liabilities and tax issues exist

The role of tax due diligence then, is not to avoid taxes, but rather to show where they arise, thus allowing those involved in Mergers and Acquisitions to make more informed decisions.

Making mistakes or oversights in tax due diligence can lead to onerous penalties from the tax authority, or, audit by the tax authority.

Any oversight in a tax due diligence risks reputational damage. Everyone has to pay tax, so if a company is looked at as a tax evader, it won't tend to play well with stakeholders such as customers and distributors.

A critical step in your M&A journey

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Discover the ins and outs of Tax Due Diligence in the context of Mergers and Acquisitions with IoT Advisory

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Enhance Tax Due Diligence Efficiency with IoT Advisory

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Thinking of buying, selling or merging?

Contact us today to take a proactive tax due diligence step towards a successful sale or merger.

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