Tax Structuring & Planning in M&A: The Silent Deal Maker (or Breaker)

By CMA Ravi Monga

M&A deals aren't just about strategy, valuation, or synergies. Taxes can quietly drain — or defend — a massive chunk of deal value. Let’s break down how tax structuring acts as the invisible force behind successful M&A execution.

1. Concept: Why Tax Strategy Is the Backbone of a Smart Deal

Every M&A transaction triggers tax consequences — sometimes obvious, often hidden. From selecting the right deal structure (share vs. asset) to planning how profits will be repatriated post-acquisition, tax strategy determines whether a deal creates value or erodes it.

A well-designed M&A tax plan ensures:

• Deal value is preserved

• Post-merger integration becomes smoother

• No unexpected tax liabilities surface later

• ROI is maximized with strategic cash flow planning

  
  

In short, tax drives the economics of the deal, not the other way around.

2. Law: Navigating the Legal Tax Landscape

Modern M&A deals operate in a complex global tax environment shaped by:

• Double Tax Treaties

• OECD BEPS Guidelines

• CFC (Controlled Foreign Corporation) Rules

• GAAR / PPT (Principal Purpose Test)

• Substance requirements

  
  

These frameworks ensure that tax planning is linked to real commercial purpose, not just aggressive minimization. Ignoring these laws can lead to:

• Treaty benefits being denied

• Tax leakages

• Litigation or heavy penalties

• Deal restructuring delays

  
  

Understanding the legal guardrails is essential before structuring any cross-border M&A deal.

3. Procedure: How to Structure the Tax Side of a Deal

A well-managed M&A tax process typically includes:

✓ 1. Determine the Deal Type:

• Share Purchase — continuity, access to losses, avoids step-ups

• Asset Purchase — depreciation benefits, but may trigger taxes for seller

  
  

✓ 2. Optimize the Funding Mix:

• Pure cash

• Share swap

• Hybrid debt instruments

• Intra-group financing

  
  

✓ 3. Choose a Holding Company Jurisdiction:

Preferably one with:

• Strong treaty network (Netherlands, Singapore, UAE)

• Participation exemption

• Good substance framework

  
  

✓ 4. Apply Treaty Optimization:

Lower withholding taxes on:

• Dividends

• Interest

• Royalties

  
  

✓ 5. Allocate Purchase Price Properly:

This impacts:

• Goodwill

• Deferred tax

• Amortization benefits

• Carry-forward losses

  
  

✓ 6. Align Transfer Pricing:

Cross-border transactions must be consistent with TP policies — especially post-merger supply chains.

✓ 7. Prepare for Tax Due Diligence:

Both buyer and seller must assess:

• Historical tax risks

• Compliance gaps

• TP exposure

• Indirect tax issues (VAT/GST)

  
  

4. Practical Example: The Netherlands Holding Play

An Indian global manufacturer acquired an EU-based enterprise. To optimize tax flow, they routed the deal through a Dutch holding company.

Why Netherlands?

• Lower withholding tax on dividends under India–Netherlands treaty

• Participation exemption eliminates tax on foreign dividends/capital gains

• Strong EU reputation & credible substance ecosystem

• Smooth profit repatriation with minimal leakage

  
  

But they did one thing right:

They ensured real substance — office, resident director, payroll activity, local governance, bank account, board meetings. This protected the treaty benefits and future tax position.

5. Mistake to Avoid: Ignoring Deferred Tax Liabilities

A classic oversight in M&A tax planning: Deferred tax arising from goodwill, asset step-ups, and loss utilization.

Example:

• In an asset deal, the buyer gets depreciation benefit.

• But the seller may face deferred tax liabilities due to revaluation.

  
  

If not modeled upfront:

❌ Deal pricing becomes unrealistic

❌ Buyer overestimates future earnings

❌ Seller underestimates their tax outflow

Always model deferred tax impact in the valuation stage — not after signing.

6. Pro Tip: Think Integration Before Execution

The best M&A tax strategies work backwards:

Integration Goal → Tax Structure → Deal Execution

Start tax planning for Day 1 integration early:

• TP documentation

• Intercompany agreements

• Accounting alignment

• Supply chain restructuring

• Post-merger entity rationalisation

  
  

A proactive tax roadmap prevents disruptions, disputes, and cash leaks.

7. The Importance of Communication

Effective communication is key in M&A. It ensures that all parties understand the tax implications. Clear discussions help in aligning goals and expectations. This reduces the chances of misunderstandings later on.

8. The Role of Technology in Tax Planning

In today’s digital age, technology plays a crucial role in tax planning. Advanced software can help in analyzing data, forecasting tax liabilities, and ensuring compliance. Leveraging technology can streamline the entire M&A process, making it more efficient.

Closing Thought

In M&A, tax isn’t a back-office task. It’s one of the biggest value levers. When structured well, tax planning can add millions in shareholder value. When ignored, it can quietly destroy a deal.

If you're a finance leader, advisor, or M&A professional, drop a message to get early access to this Value Lever.

Let’s make tax structuring a deal maker, not a last-minute headache.

Author Profile: CMA Ravi Monga (Brief Bio)

CMA Ravi Monga is an international tax strategist, M&A structuring specialist, and founder of Purple People International Pvt. Ltd. With 20+ years of cross-border tax, corporate restructuring, and global expansion experience across Europe, UAE, Africa, and Asia, he advises businesses on creating tax-efficient group structures, international holding company design, treaty optimization, and M&A tax planning.

He has authored multiple books in Finance, Taxation, Leadership, and Corporate Strategy, including upcoming titles on International Tax Alchemy, UAE VAT, and M&A Structuring. As a consultant, mentor, and trainer, Ravi helps CEOs, CFOs, and entrepreneurs build compliant, scalable, and globally optimized business structures.