Carve-Outs: Tax Considerations Through The Transaction Process

Introduction

In a challenging economic environment, we commonly see businesses seek to re-evaluate strategic priorities. One common outcome of these considerations is where a business will look to divest non-core divisions.

Carving out units can often be seen as 'simple' from a tax perspective – why wouldn't it be if you are buying newly incorporated businesses with limited tax history in a structure set-up by the sellers specifically for the carve-out transaction? However, whilst the tax due diligence can, in certain instances, be simple; given the systems and people involved, the structuring and ongoing tax considerations are not always straightforward. In many circumstances, day one considerations can have longer term impacts from a tax perspective. As a result, it is always important to discuss your long-term post-transaction objectives with your tax advisers for these transactions.