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Tax Efficient Supply Chain Planning for M&A Transactions


There has been a clear shift in the traditional investment appraisal and due diligence techniques in the world of mergers and acquisitions (M&A) in recent years. Returns are becoming increasingly driven by operational improvement rather than financial engineering. As a result, tax efficient supply chain planning (TESCP) is playing an increasingly significant role in M&A transactions, especially where the benefits are realised within a short time frame.

The benefits of introducing TESCP techniques are considerable. Taxand UK discusses the significance of TESCP in more detail.

TESCP involves the centralisation of functions, assets and risks. As multinationals seek to become more global or regional, adopting a business model that involves centralising key functions, assets and risks drive costs out of the business, while simultaneously creating operating efficiencies. The result is the realisation of significant above-the-line savings. By locating the "principal" company in a tax-efficient location, tax arbitrage can also be achieved.

Key areas where TESCP can add substantial value include:

  • Consignment manufacturing
  • Limited risk distribution
  • Centralised procurement
  • Intellectual property planning
  • Centralisation of management

Taxand UK takes a more detailed look at the value that TESCP can add to businesses.

Taxand's Take

When undertaking M&A due diligence, it is essential to consider the benefits that TESCP may return. Coupled with traditional planning techniques, TESCP maximises shareholder return and significantly reduces investment payback. The key part is ensuring TESCP forms a critical part of the investment decision process. With the current crackdown on one-off tax planning solutions, a commercially based TESCP strategy remains one of the only viable means of achieving tax efficiency.

Your Taxand contacts for further queries are:
Tom McFarlane
T. +44 207 072 3201

Ian Fleming
T. +44 207 663 0425

Taxand's Take Author