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Mergers, Acquisitions, and Corporate Restructurings, 7th Edition
book

Mergers, Acquisitions, and Corporate Restructurings, 7th Edition

by Patrick A. Gaughan
December 2017
Intermediate to advanced content levelIntermediate to advanced
672 pages
24h 26m
English
Wiley
Content preview from Mergers, Acquisitions, and Corporate Restructurings, 7th Edition

CHAPTER SIXTEENTax Issues in M&A

DEPENDING ON THE METHOD used to finance the transaction, certain mergers, acquisitions, and restructuring may be tax-free. Some firms may use their tax benefits as assets in establishing the correct price that they might command in the marketplace. For this reason, tax considerations are important as both the motivation for a transaction and the valuation of a company. Part of the tax benefits from a transaction may derive from tax synergy, whereby one of the firms involved in a merger may not be able to fully utilize its tax shields. When combined with the merger partner, however, the tax shields may offset income. Some of these gains may come from unused net operating losses, which may be used by a more profitable merger partner. Tax reform, however, has limited the ability of firms to sell these net operating losses through mergers.

Other sources of tax benefits in mergers may arise from a market value of depreciable assets, which is greater than the value at which these assets are kept on the target's books. The acquiring firm that is able to step up the basis of these assets in accordance with the purchase price may finally realize tax savings.

This chapter discusses the mechanics of realizing some of the tax benefits through mergers. It also reviews the research studies that attempt to determine the importance of tax effects as a motivating factor for mergers and leveraged buyouts (LBOs) and examines the different accounting treatments ...

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Publisher Resources

ISBN: 9781119380764Purchase book