Planning for a new era of M&A
With the level of global M&A activity gradually creeping towards 2007, pre-financial crisis, levels there comes a new shape to the geographies, structures and complexity associated with the latest global deals. Key M&A trends were discussed today at the Taxand Global Conference hosted by Taxand China in Shanghai.
Frederic Donnedieu de Vabres, Chairman of Taxand, the world’s largest independent global organisation of specialist tax advisors to multinational businesses, provides an overview of the session run by Taxand’s global M&A service line team and presented by Albert Collado, Taxand Spain; Jonathan Wu, Taxand China, Marc Sanders, Taxand Netherlands and Ernie Lai King, Taxand South Africa:
"The buzz caused by a strengthening of global capital markets, resurgence in mega-deals and the increasing availability of debt has been muffled more recently, with uncertainties around the stability of the political and fiscal environment in certain jurisdictions such as Ukraine. Still opportunities do exist as valuations stay low and deleveraged strategies play out. GDP growth in fast-growing emerging markets, such as Africa, has provided particular opportunities and these countries continue to take an ever-increasing share of foreign and direct investment.
Emerging markets are building a presence in the M&A arena at an interesting time. From a tax perspective, the ongoing scrutiny of tax arrangements across the globe will inevitably have an impact on many. Moreover, we are at the outset of fundamental reforms to the international tax regime through initiatives such as the OECD’s BEPS action plan. Countries are reacting domestically, shifting their approaches to transfer pricing, anti-trafficking losses, GAAR, interest deduction limitations and anti-hybrids.
Whilst media sentiment would imply the level of corporate taxation is one of the key tax considerations in M&A, a number of other factors involved in the choice of holding location deserve consideration. These include the presence of substance, the simplicity of the legal system, the stability and reliability of tax rules and the economy, and the extent of the country’s tax treaty network. Assessing the decision on the tax rate alone is too simplistic an approach and as new countries increase their global presence in the M&A market, these other factors are coming to the fore."
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“China is a good case study in how tax developments are impacted by significant growth in economic and M&A activity as, from a low base, the country now has 96 direct tax treaties. Inter-country cooperation is a clear theme in international taxation and one that is not solely being driven by initiatives from the OECD or G20, but also by individual countries and their multinationals which are looking to maximise their growth potential. Now more than ever before in this new era of M&A tax planning tax strategies need to be aligned with the business to maximise opportunities and manage risk."