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Practitioner's Complete Guide to M&As: An All-Inclusive Reference, with Website by David T. Emott

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Topic 84

Structuring the Deal: An Overview

Topic 84 presents an overview of many of the essential legal and tax issues associated with the primary taxable and tax-deferred deal structures and the often-conflicting desires of buyers and sellers.

The reader is encouraged to take the time to read the text in conjunction with the referenced Appendices to gain the appropriate level of understanding of the subject matter discussed in the narrative. Appendices are either presented at the end of this and each remaining Topic or are available for review and download on this book's companion Web site (see the About the Web site page for login information).

DEAL STRUCTURES AND LEGAL AND TAX IMPLICATIONS

  • Deal structuring is concerned with the legal form and tax consequences of a transaction to best satisfy the desires and goals of sellers and buyers—goals that are, many times, at odds:
    • Sellers often prefer to limit or defer tax liability on a transaction structure (receive shares). This is often at odds with buyer goals of fast investment basis write-off (pay cash for assets).
    • Buyers often prefer to obtain as much of a new, short-lived tax basis as possible for their investment. Often this leads to a taxable seller transaction structure that sellers do not desire.
    • On taxable deals, buyers often prefer to maximize the allocation of the purchase price to inventory, depreciable assets, and faster turnover assets to exploit the postclosing current tax deduction and reduce postclosing taxes. ...

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