Maximizing Value Creation in Global M&A Deals Through Effective Tax Planning

Global merger and acquisition (M&A) activity is on the rise for private equity (PE) portfolio companies looking to drive long-term value for investors. After completing a transaction, these companies are focusing on executing their 100-day plans to drive value creation. One key aspect that should not be overlooked is the importance of effective tax planning in post-close value creation.

With the help of a knowledgeable global tax advisor, portfolio companies can implement tax positions and strategies to achieve immediate and long-term tax benefits. Here are some approaches that portfolio companies can take to kickstart value creation in cross-border deals:

1. Optimize global operational processes:
– Enhance global supply chain efficiency by assessing global trade activities: By strategically evaluating supply chain networks, companies can improve operational efficiency, manage risks, and reduce costs. Focusing on cross-border customs and international trade operations can lead to significant benefits.
– Identify international indirect tax opportunities: Examining a company’s VAT registration footprint can help streamline compliance requirements, cut costs, and mitigate risks. Outsourcing VAT compliance work or automating specific functions can lead to improvements.
– Rationalize redundant or unnecessary entities within a global structure: Streamlining operations and optimizing resource allocations through legal entity rationalization can enhance financial performance. By focusing on core competencies and minimizing unnecessary complexities, companies can better navigate the global market.
– Analyze permanent establishment risk globally: Understanding potential permanent establishment considerations can help companies make informed decisions regarding market entry, expansion plans, and strategic initiatives. This proactive approach can reduce exposure to income tax filings and costs.

By proactively addressing these areas, portfolio companies can reduce costs, increase productivity, and improve efficiency while aligning with their strategic goals. Effective tax planning and operational optimization are key components in driving value creation post-merger or acquisition.