The M&A market is struggling to reach the heights it was at more than two years ago. Blockbuster transactions are still taking place, such as Kraft/Cadbury, Berkshire Hathaway/ Burlington Santa Fe, but the feeling is the market is unlikely to recover its health soon.
A big change from a few years ago is the difficulty in obtaining large amounts of credit and this is keeping private equity funds, in particular, away from purchases.
Tax policy developments are also having a tangible impact on deal flow. Closer cooperation between national revenue authorities, including more exchange of information, stricter enforcement and uncertainty because of possible tax reform are contributing to nervousness.
The latest edition of International Tax Review's M&A tax yearbook, co-published with Alston & Bird, Ernst & Young, Eurofast Taxand - Cyprus, Gowlings - Taxand, Machado Associados, Landwell et Associés, PricewaterhouseCoopers and Slaughter and May, offers such specialist advice. The guide is the 52nd in the magazine's Tax Reference Library which has been designed to give in-house tax counsel and directors the most cutting-edge advice for planning their corporation's tax strategy in a range of practice areas.
Machado Associados considers what tax savings can be achieved in Brazil with the right deal structure; Gowlings – Taxand in Canada looks at what private equity funds should consider when doing a transaction in that country and Eurofast Taxand - Cyprus highlights the effect of the EU Merger Directive on deals.
Favourable rules on areas such as tax losses and consolidation make deals easier to pull off in France, explains Landwell et Associés; and new tax reliefs in Germany are aimed at boosting the transactional market, points-out PricewaterhouseCoopers; and advisers from Ernst & Young in Kazakhstan urge investors to keep on top of the approach of the revenue authorities to topics such as controlled foreign companies.
Debt or equity and the type of investment vehicle to use are two of the questions to consider when investing in Mexico, explains PricewaterhouseCoopers; taxpayers in Russia need to be aware that the revenue authorities may not be familiar with concepts found elsewhere, such as consolidation, says Ernst & Young, while VAT reform has boosted Switzerland's appeal for holding companies, believes PricewaterhouseCoopers.
In the UK, forthcoming reform of controlled foreign company rules is one of the uncertainties that are stopping companies from getting back into the M&A market, explains Slaughter and May. An exit strategy should be an essential part of pre-deal planning in the US, believes Alston & Bird.
Ralph Cunningham,
Managing editor, International Tax Review
