Workshop on "Strategies and Challenges in Tax Due Diligence" by Matthias Marbach and Juliette Buob on the occasion of the ISIS seminar "Current Tax Topics in M&A Transactions" on March 21, 2024.
Note: This language version is an automatically generated translation. The text may therefore contain linguistic and terminological errors.
view in original language (German)X. AB (Sweden) plans to acquire 100% of the shares in Y. Holding AG (Zurich). The current shareholder structure of Y. Holding AG is as follows1:
The Y. Group is an IT company, with its core activities carried out by B. AG (Zurich) (owner of the IP and customer contracts). A. GmbH is a service provider that develops software on behalf of B. AG. Y. Holding AG is a pure holding company.
The structure can be simplified as follows:
Y. Holding AG was founded in 2010 by A and B. C (Managing Director) acquired the shares in 2020 from A and B at their market value at the time (EBITDA x8 multiple minus net debt).
1 These findings are derived, among other sources, from the share register, old purchase agreements, and similar documents.
The purchase agreement is currently scheduled to be signed in Q2 2024. The parties have agreed in a letter of intent that the purchase price shall be determined based on the consolidated Swiss GAAP FER financial statements as of December 31, 2023 (locked-box mechanism). The EBITDA multiple method (multiple of 10) is to be used to calculate the *enterprise *value. The transaction is expected to close shortly after the purchase agreement is signed.
The statutory balance sheet of Y. Holding AG as of December 31, 2023, presented the following picture:
As part of the due diligence process, you requested the cost of acquisition overview1. It presents the following picture:
In the Swiss GAAP FER financial statements, the investments are carried at their historical cost (B. AG at CHF 3 million and A. GmbH at CHF 1 million).
1 Often an attachment to the tax return or a separate statement.
What does X. AB, as the buyer, need to consider?
As part of the due diligence process, you have gained the following insights1:
What should X. AB, as the buyer, take into account?
1 These findings can be obtained through a discussion with management or, among other things, by reviewing the following documents: contracts, balance sheets, and, if applicable, bank statements, as well as a separate overview from the target company regarding intra-group transactions.
As of December 31, 2023, B. AG has recognized a provision for current taxes in the amount of CHF 35,608. Based on the tax documents received, you have gained the following insights:
The tax provision calculation received showed the following:
What does X. AB, as the buyer, need to consider?
The consolidated Swiss GAAP FER financial statements as of December 31, 2023, show the following deferred tax items (assumption: A. GmbH has no deferred tax items):
What does X. AB need to consider as the buyer?
