The deals market is hot and fast-moving — collaborating with Tax early on can be a strategic differentiator that helps enhance overall deal value in a complex, ever-changing environment.
Increased disruption, industry convergence, innovation and transformation, and the need to shift to new business models to stay competitive means that value creation in deals has never been more important. While navigating the dynamic deal environment, businesses should understand the impacts on three key areas that can be important to creating deal value:
Managing the implications of a deal remain critical to success, but tax issues are just as important. As a strategic partner, Tax can help contribute real-time insights and support throughout the entire deal process to help enhance deal value in each of these impact areas. For example, a buyer needs the right tax strategy and doing a deal is a one-off opportunity to revisit tax structures completely. It allows the business to re-examine the way it operates – such as rethinking their operating model and supply chain design – and helping to create new platforms and policies.
The current regulatory landscape and pending US tax reform is also adding to the complexity of the deal, resulting in both positive and negative implications on deal structures, deal valuations, and post-deal integration plans. Dealmakers should proactively employ Tax to model alternative scenarios to help assess the impact of proposed tax law changes in the evaluation of a target's tax profile and post-deal integration plans.
A keen focus on value creation, in the deal and beyond, can help better position companies for success. Given that, many dealmakers are anchoring deal value in the ‘value bridge’ concept considering all value levers and new deal dynamics.
A ‘value bridge’ can be used to help identify and evaluate the strategic agenda for value creation, both organic and inorganic, in order to help prioritize initiatives that will result in the highest value capture. Every company situation is unique, so the application of the value bridge may vary. However, the mindset of viewing every dimension of a deal as a lever for value applies to any transaction and Tax should be embedded within the overall strategy.
The profile of the business is expected to change post-transaction, along with the tax footprint. This provides an opportunity for companies to use the deal as a life event to support a broader transformation of various business functions (e.g., tax). When undergoing a transaction, the business should consider and map out their ideal future state of the post-close company with a heavy focus on day-one readiness and change management.
Example of levers to pull when evaluating value creation and cost of your post-deal Tax function:
A trusted value creation plan that covers all aspects – including strategic repositioning, improving business performance, optimizing assets, enhancing operating models, and considering the right tax structure – can aid you delivering transformative value, while also helping to protect the reputation of your organization.
Starting early and engaging Tax throughout the deal process (i.e., planning through execution) can help secure a more holistic, value-add approach. It can also help you manage overall cost and risk to the organization.