buying a company
Benefit from our expert tax advice on acquisitions and subsequent corporate structures.
You would like to buy a company? Insightful, end-to-end tax advice on your acquisition and the new corporate structure can make your purchase much more attractive economically.
Buying a company
As two-in-one attorneys-at-law and tax advisors with many years of experience in the transaction business, we are at your side for every stage of a company acquisition and all tax aspects that arise:
Tax Due Diligence
When you first consider buying a company,it is important to find out how it is currently taxed. To this end, we conduct tax due diligence for our clients.
If you decide to purchase a company, we will explore whether we can optimise the transaction structure to create tax advantages for you. In addition to determining whether an asset deal or a share deal is more advantageous, financing the transaction is a particularly important aspect. We will happily calculate the tax implications of possible alternatives for you. If we can help you show the seller a way to make the transaction more tax-efficient for them as well, they will likely accommodate you on the purchase price.
Assistance with contract negotiations
Once you decide to purchase and the basic structure has been established, we will support you during contract negotiations – especially with the negotiating tax provisions, thanks to our expertise as both lawyers and tax advisors.
Future corporate structure
Along with contract negotiations, we can examine the tax aspects of the new corporate structure. Interposing a holding company, setting up tax groups and up- or downstream reorganisations of the companies in the existing structure: these are just some matters we address for you.
Thanks to our experience, we understand not only the mechanics and the tax structure of a transaction but also the economic correlations.
We have summarised the essential tax aspects of a company acquisition in the standard work Holzapfel/Pöllath, Unternehmenskauf in Recht und Praxis, 15th edition, 2017, pages 32–141. And here is a list of published transactions that we have worked on in the past five years.
Analysis of the current state (tax due diligence)
Before you decide to buy a company, you typically ask tax experts to review the situation of the company (tax due diligence).
Tax due diligence essentially emphasises five aspects:
- What is the current tax status of the company? What tax burden can you expect if the company continues as before?
- What tax burdens from the past could you incur as the future owner? You must contractually protect yourself as much as possible here (especially in tax provisions).
- How will the current tax situation change upon transfer of the company? Are loss carryforwards no longer applicable? Or is there additional depreciation potential? Both positive and negative changes must be taken into account when deciding to buy or calculating a purchase price.
- Does the transfer trigger any special taxes that you, as the purchaser, may have to pay? Such tax burdens, e. g. property acquisition tax, should be clearly specified in the contract and priced in accordingly.
- Are there any special characteristics that need to be regarded when considering the (future) tax structure?
Tax due diligence is the right way to answer these questions, and we will be happy to assist you. If your tax department or your tax advisors conduct the actual tax due diligence, we can support them with our transaction experience.
In tax terms, the most demanding part of a company acquisition is defining the future structure of the acquired company. This decision is based on tax criteria, liability aspects, the transferability of liquidity, and much more.
If your company buys another company, the primary task will be integrating the acquired company into your existing structure. Here, the focus is on economic and organisational aspects. But there is also a lot to do in terms of taxation. To name just one example: It would be unfortunate if the newly acquired company (still) incurred losses that are not used for tax purposes, while the profits of other parts of the company are taxed in full. In such cases, we will analyse for you how we can achieve better loss exploitation in the new group.
If you’re a financial investor buying a company, you are often freer in designing the corporate structure, after all, you do not have to integrate the acquired company into an already existing operational structure. As advisors to financial investors, we ensure first and foremost that you meet the requirements of the financing banks and that your financing outlay is not a tax loss. In order to offset the financing expenses against income, we tailor the corporate structure to the new requirements (e.g. by merger, tax group, change of legal form to a KG). We always keep an eye on a possible exit for financial investors and take precautions to ensure that your structure does not become an obstacle to potential refinancing (recap).
We regularly advise on transactions in which the seller retains a small stake in the company. If the seller retains only a small part of the existing company, that may sound simple enough at first. However, this “remaining stake” can become an obstacle when the buyer wants to realise their structural goals. In most cases, the parties therefore agree that the seller sells the entire company and in turn participates in the buyer company (re-investment).
However, the re-investment should – as far as possible – not result in any unnecessary taxes. Although this is fundamentally the seller’s tax responsibility, our experience shows that it is always beneficial when we, as advisors to the buyer, also consider the seller’s tax situation and propose a suitable structure for them. For a tax-efficient re-investment, we typically consider a contribution against the issue of new shares in the buyer company (non-cash capital increase).