M&A AND DUE DILIGENCE

Transcription

1 M&A AND DUE DILIGENCE High Level Tax Conference Toronto 2016 B Nathaniel Collins, BDO USA 29 September 1 October 2016 Page 1

2 TODAY S AGENDA Global Procedures for Crossborder Tax Due Diligence Engagements Introductions and Overview of Initiative Request for Proposal Guidance Terminology Guidance Execution Guidance Q&A Closing, Next Steps Page 2

3 REQUEST FOR PROPOSAL GUIDANCE TERMINOLOGY GUIDANCE Introduction to the TDD Request for Proposal Guide and the Terminology Guide Nate Collins, CPA, MST Tax Partner Transaction Advisory Services BDO USA, LLP UNITED STATES Koos van der Kemp Partner Tax Transaction Services BDO Investigations B.V. THE NETHERLANDS Page 3

4 REQUEST FOR PROPOSAL GUIDANCE Introduction to the TDD Request for Proposal Guide Available on connect - see Tax Tax Due Diligence Tools Benefits of RFP Guide Consistency normalization w/out overlooking local country market norms or customs Facilitates the use over more junior staff / checklist manifesto Risk and brand management Ultimate goal of serving the middle-market M&A space better than the competition Page 4

5 REQUEST FOR PROPOSAL GUIDANCE Introduction to the TDD Request for Proposal Guide Contents / Overview of Guide Lead firm vs. Member firm concept Lead firm Identification of Member firm contact Clear communication of opportunity / needs Providing sufficient relevant information / context Launching the project (immediate first steps) Member firm Scoping Communication, etc. Page 5

6 REQUEST FOR PROPOSAL GUIDANCE Introduction to the TDD Request for Proposal Guide Selected specific points, emphasis added Who is going to do what and by when, be reasonable and provide context Encourage/raising country specific issues Lead firm to provide templates where appropriate In most cases, more information/context is better for tailoring and winning work TDD work plan can vary widely from one deal to the next (e.g., asset deal vs. Stock deal); value added observations usually originate from knowledge of deal specifics Page 6

7 DUE DILIGENCE TERMINOLOGY Available on connect - see Tax Tax Due Diligence Tools Goals: Speak the same language More efficiency during due diligence process Guidance in client/prospect discussions to determine scope of a project List is not extensive Based on international terminology (local interpretation may differ) High Level Tax Conference M&A and due diligence Page 7

8 EXECUTION GUIDANCE Effective TDD and an Introduction to the TDD Execution Guide Martina Elisabeth Luetticken Lawyer, Certified Tax Consultant M&A Tax and Legal Services BDO AG GERMANY Alistair Kirkbright Director Corporate and M&A Tax Services BDO LLP UNITED KINGDOM High Level Tax Conference M&A and due diligence Page 8

9 DURING WORK Key document Member firm Execution Guide Available on connect - see Tax Tax Due Diligence Tools Guidance on how to execute on a tax DD opportunity and how to report on finding sin a practical and business-like manner Details: Timely Communication / Flagging Global Cooperation Reporting Managing Scope and Budget High Level Tax Conference 2016 Page 9 M&A and due diligence

10 DURING WORK Timely communication / Flagging General Communication Contact of lead firm for further information or guidance at any time during the process Special challenges in international DD projects Selective use of communication Page 10

11 DURING WORK Timely communication / Flagging Red Flags should always be raised ASAP, e.g. Process issues Diligence findings Expansion of scope Any unusual or particular tax issues triggered by such a transaction and/or that are otherwise relevant to your local territory Additional services Page 11

12 DURING WORK Global Cooperation Collaboration on global issues, e.g. transfer pricing or permanent establishments Avoid the duplication of efforts by coordinating with lead firm the division of responsibility How should group issues be addressed? Different perspectives Perspective of one jurisdiction -General comments Page 12

13 DURING WORK Reporting Be practical! Evaluation of risk levels and quantification of risks Seek to provide findings/reporting to lead firm ahead of client/deal deadline Commercial focus of findings Materiality limit Client needs to understand the issue, but not technical details to make a commercial decision Provide information as to how to handle that risk Warranties and indemnities Reduction of purchase price Escrow Structuring ideas Page 13

14 DURING WORK Managing Scope and Budget See above: Red Flags Avoid expansion of scope Budget Be mindful of costs incurred versus budget Any factors that are outside your control that could be causing an unexpected increase in costs that was not anticipated at the start of the assignment? Poor flow of information Material tax issues that were not identifiable when scoping the work If necessary, provide the lead team with regular updates on costs incurred Page 14

15 CHECK OF REPORT A good report should... Be clear Do not use ambiguous language Explain technical issues Structure your report: scope of work sources of information (documents reviewed) section for different taxes accounting section different section for each company High Level Tax Conference M&A and due diligence Page 15

16 CHECK OF REPORT A good report should... Be concise Include an executive summary Consider using tables to summarise information Quality not quantity Use abbreviations (and explain them!) When reporting issues, answer the question so what? What do your findings tell you? Is there a cash tax exposure? Are losses reduced? Will future tax be triggered? Does the target give low priority to tax compliance? Page 16

17 CHECK OF REPORT A good report should... Demonstrate expertise What is the tax authority s views about the issue being raised? Is it common practice for such an issue to arise? Is this a developing area of tax law (grey area)? Do you have any experience of the issue being raised? Make recommendations / give your point of view Consider materiality Depends on size of deal Many minor issues resulting in large exposure tabular reporting? Page 17

18 CHECK OF REPORT Indicators of a bad report Content Unclear messages No quantification of risk or quantum After reading the report the client does not know what to do how to solve problems that have been raised Raise access to information issues that have not previously been discussed with client Discuss problems early with client so no surprises when client receives report Give client enough time to use negotiation strength to get you what you need Raise unsolved problems without recommendations Contain information / detail that is unnecessary Page 18

19 CHECK OF REPORT Indicators of a bad report Form Spelling mistakes Inconsistent use of company names / abbreviations Sentences that do not make sense Different currencies Numbers that do not add up Others? Page 19

20 Questions? Page 20

21 BIOGRAPHY Nate Collins, CPA, MST Tax Partner Transaction Advisory Services Direct: Mobile: Mr. Collins is a leading partner in BDO s United States TAS Tax practice and has directed the buyside/sell-side tax due diligence and related negotiations for a wide variety of transactions. As a fully dedicated M&A tax advisor, Nate has significant experience executing in both the domestic and multi-jurisdiction arenas, as well as supporting the M&A related special tax project needs for strategic buyers, financial investors, and acquisition targets. PROFESSIONAL AFFILIATIONS American Institute of Certified Public Accountants EDUCATION B.B.A. in Accounting, Loyola University Chicago MS in Taxation, DePaul University, Kellstadt Graduate School of Business High Level Tax Conference 2016 [Presentation title] Page 21