A detailed plan is critical to accomplishing all the tax-related tasks that need to occur in the months after an M&A transaction closes. Your 100-day plan for managing the tax process should include five key steps.
After the acquisition: 5 steps to manage the tax process
1. By Russ Daniel, Managing Director, M&A Tax Services
July 7, 2015
An integrated approach and a detailed plan are
critical to accomplishing all the tax-related tasks that
need to occur in the months after an M&A
transaction closes. Such a transaction stretches
internal resources and is incredibly disruptive to the
companies involved, so it’s imperative to stay focused
and map a timeline of what needs to happen to meet
all deadlines.
Why preclose involvement helps
The tax function’s involvement should begin during
due diligence — the fact-finding time to ask
questions related to integration and to plug in to be
able to boost the benefits for your company. For
example, who gets the benefit of transaction costs,
whether investment banking fees, attorney fees,
bonuses, stock option payouts, etc.? The transaction
costs language can be detailed and pages long —
telling you exactly when someone gets paid and how
to calculate it — or a five-line paragraph that says
little. Be involved early to avoid a scramble to
interpret the language.
Any contractual deadlines also must be met — for
example, if you commit to providing a tax return for
review 30 days before it’s due and a net operating
loss (NOL) carryback plan two months after closing,
you must follow through. Being connected up front
allows you to know the timing obligations and plan
for meeting them.
100-day plan
Your 100-day plan for managing the tax process
should include five key steps — each with several
components:
Document deadlines for tax and financial
reporting, and contractual deadlines.
1.
Prioritize tasks and projects.2.
Assign responsibility.3.
Budget time and costs.4.
Organize workflow.5.
1. Document the deadlines
Documenting the deadlines is your first step to
prioritize tasks and assign responsibility — whether
internally or with outside help — and should address
appropriate time requirements and costs. You don’t
want to overwhelm your team, but you also have to
get things done on a limited budget. If you come
into a transaction two weeks after it’s closed, for
example, and explain why someone needs a Section
382 study no one was planning on, you are throwing
a wrench into someone else’s budget.
You need to conduct a thorough read-through of the
documents, including credit agreements and
disclosures. Coordinate with the financial reporting
team to document reporting deadlines. Document
tax deadlines for filings, elections and payments. Tax
is also one of the biggest areas for deal provisions
such as indemnification provisions where certain
items have to be filed to get indemnified from
liability.
2. Prioritize tasks and projects
Establish a critical path for projects and fill in all the
blanks for each one. For example, if you are required
to file an NOL carryback claim for the target within
three months of closing, you have to finalize the stub
period filing. To do that, you need to figure out
transaction costs; and to do that, you must have
allowed the time. If you need to have it done three to
four months from today, you should have started last
week, and you are already behind.
Set calendar-critical deadlines and work backward
from them to establish the necessary timing.
3. Assign responsibilities
Assess the time required to meet deadlines. Chances
are you have not stacked up enough staff to account
for all the acquisition needs, and you are piling work
onto people who are already short on time. You need
to know what you can outsource, what you can skip