Tax Departments Play Critical Role in M&A Activity

The many wide-ranging impacts of the 2017 tax act have put a spotlight on the importance of tax departments to the success of M&A transactions, according to a new survey of corporate tax professionals by Bloomberg Tax. The vast majority (80 percent) said that tax departments are extremely or highly involved in such transactions.

M&A transactions present tax-related complexities, risks, hidden costs, and unknowns that tax departments must address.  The majority of respondents (60 percent) report that they are becoming involved in M&A transactions before preliminary agreements are struck to help optimize tax structuring.  Given their complexity, the three aspects of M&As that respondents deemed most likely to be difficult to handle are post-transaction (46 percent), international (non-U.S.-based) taxes (44 percent), and U.S.-based international taxes (42 percent).

M&A activity can have a dramatic impact directly on tax departments, with 31 percent of respondents reporting increased staff sizes, and more than half (58 percent) indicating that their roles and responsibilities had changed as a direct result of their company’s M&A activity.  An uptick in financial resources allocated to tax departments in the wake of an acquisition or merger was also noted, with over half of respondents reporting increased budgets (52 percent) and three in four (78 percent) reporting increased spend on external consulting.