INTERNATIONAL TAX – Cross-Border Mergers & Acquisitions

Case Studies | Prager Metis | Jul 26, 2021

Cross-Border Mergers & Acquisitions

Client with a U.S. entertainment company needed assistance with cross-border acquisition planning of foreign entertainment group with several operating companies that owned valuable intellectual property rights and were involved in sales and licensing. We evaluated several options for tax-efficient acquisition, including the following:

  1. Asset purchase.
  2. Stock acquisition.
  3. Stock acquisition with a section 338 election to get a step up in the basis of the target assets plus US elections to treat foreign entities as pass-throughs.
  4. Cross-border passthrough structure.
  5. Use of a US passthrough entity with foreign corporations.
  6. Cross border corporate structure

The various options differ in the tax consequences of implementation, operation of the combined group, and ultimate sale.   Also, the options differ with respect to the ability to defer US tax, utilize foreign tax credits, and overall global effective tax rate.

In the end, we helped the client adopt a very tax efficient structure that was well aligned with their operational goals and ultimate sales objectives.