M&A Transactions
M&A stands for "merger" and "acquisition," referring to the general term for company transfers and mergers. Companies engage in M&A transactions for various reasons, including investment, creating synergies, product and/or market diversification, vertical or horizontal growth, increasing management efficiency, strengthening distribution networks, and R&D activities. While M&A transactions are carried out for commercial reasons, they are also supported by tax laws. In some cases, M&A transactions are used as an instrument solely for tax advantages. Therefore, it is important to consider M&A transactions from both commercial and tax law perspectives, evaluating tax advantages and disadvantages together.
Share transfers are also a type of M&A transaction. Under certain conditions, share transfers can provide various tax advantages. To benefit from these tax advantages and avoid unnecessary tax costs, it is necessary to conduct tax planning in advance and structure the company accordingly. Since taxes are a significant cost element, these transactions can give a clear idea of the actual return on investment.
Some M&A transactions do not meet expectations due to planning errors and weak strategies based on insufficient research and analysis. Factors such as overestimating the synergy resulting from M&A, high pricing based on incorrect and incomplete projections, not considering the integration plan in advance, and not giving enough importance to cultural differences between institutions can lead to undesired results. Therefore, due diligence reviews are important to avoid undesirable outcomes and ensure that the M&A process is conducted appropriately and effectively.
Due diligence is generally conducted for the following reasons:
- To gain detailed knowledge about the target company and identify risky areas,
- To increase bargaining power in the agreement based on detailed information,
- To achieve a smoother and more problem-free integration process,
- To reduce criticisms from parties, shareholders, or other stakeholders after the acquisition and to collect evidence in favor of those who conduct due diligence in potential lawsuits.
For more detailed information on due diligence reviews, please contact us.
