ETS Tax Intelligence: Preparing for a Successful M&A Transaction

M&A due diligence

Situation

When contemplating a merger, acquisition, reorganization, or divestiture (“M&A”) transaction, a structured, cohesive plan can assist employers in achieving desired outcomes.  Such planning must begin with the first phase of the M&A process, Due Diligence, and carry through to Planning/Design, Implementation/Compliance, and Post-Implementation.  Over the next few months, Tax Intelligence will focus on each of these four phases, beginning with Due Diligence in this issue.

Solution

M&A TransactionsDue Diligence is the investigation and discovery of opportunities, risks, and synergies associated with a target employer that may have a material financial impact on a buyer.  While M&A transactions are rarely employment tax driven, those with payroll and employment tax responsibilities within an organization should seek to have a “seat at the table” as early in the M&A process as possible.  Doing so will help ensure sufficient information and data is gathered to accomplish employment tax objectives.

The checklist to the right provides examples of information and data that a buyer may wish to consider obtaining during the Due Diligence process.

Once information and data have been gathered, it must be reviewed and assessed with the Due Diligence objectives in mind, however, the process does not stop here. The review and assessment more often than not will prompt the need to obtain additional information and data, which will require further review and assessment.  The insights gleaned from gathering and assessing data determines the path and need for further Due Diligence.  This dynamic cycle continues, often up to the closing date of a transaction, until the buyer is satisfied that all material opportunities, risks, and synergies have been identified.

From a state unemployment insurance (“SUI”) tax perspective, Due Diligence efforts should be strategically focused on areas that can have a material financial impact on a buyer, such as:

  • States with significant taxable payrolls
  • States with very high or very low SUI tax rates
  • Assigned penalty tax rates and the reason for such rates
  • Level of reserve account balances
  • Debits and/or credits on accounts
  • Unreported M&A transactions of the past

Value

Equifax assists employers in the Due Diligence phase of the M&A process by tailoring information and data requests specific to the facts and circumstances surrounding each transaction and by assisting buyers in reviewing and assessing this information and data for material employment tax opportunities and risks. The next issue of Tax Intelligence will focus on the Planning/Design phase of the M&A process.

For more information, please contact Pete Krieshok at (314) 214-7325 or via e-mail at pete.krieshok@equifax.com.  You can also visit our corporate blog for information on other employment tax matters that might impact your organization.

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About Sam Roberts

As an Employment Tax Senior for Equifax Workforce Solutions, Sam assists employers with complex employment tax matters including mergers and acquisitions, unemployment tax, tax authority representation, strategic planning, best practices, and compliance. Sam started his career in 2009 with Equifax Workforce Solutions as an Employment Tax Associate. He graduated in 2009 with a BS-Accounting from Trinity Christian College in Palos Heights, IL and currently holds both a Certified Public Accountant (CPA) license and Certified Payroll Professional (CPP) license.