“Sell-side tax due diligence, or reverse tax due diligence, is a proactive process that allows sellers to identify and address potential tax risks, streamline negotiations, and enhance buyer confidence in the seller’s historical tax compliance,” writes Joel Wukelic. “This allows sellers to wield both a defensive shield to mitigate tax uncertainties and a tactical sword that empowers sellers to maximize transaction value. By taking charge of the tax narrative, sellers can navigate the complexities of the M&A process with confidence and precision.”

Joel’s article, “The Benefits of Sell-Side Tax Due Diligence for Middle-Market M&A Deals,” published in Mergers & Acquisitions, covers:

  • Sell-Side Tax Diligence
    • A proactive approach to mirroring the buy-side diligence process
    • Strategies to uncover and address tax risks before negotiations
    • Tools like tax factbooks and executive summaries to streamline buyer-side diligence
  • Identifying Compliance Gaps and Strengthening Negotiation Positions
    • Addressing compliance issues to avoid penalties and future disputes
    • Quantifying tax risks to counter buyer attempts to reduce purchase prices
    • Leveraging voluntary disclosure agreements (VDAs) to clean up tax profiles
  • Enhancing Buyer Confidence and Accelerating Timelines
    • How a clean tax profile increases deal attractiveness and reduces delays
    • The role of sell-side preparation in fostering trust and reducing post-closing disputes
    • Aligning internal teams to ensure consistent messaging and readiness
  • Sell-Side Transaction Structuring
    • The importance of early coordination between tax advisors and legal counsel
    • Using tax-efficient structures to maximize after-tax proceeds
    • Avoiding costly concessions by addressing structural considerations preemptively
  • Sell-Side Deal Modeling
    • Quantifying the value of tax attributes like NOLs and interest expense carryforwards
    • Enhancing transparency around potential tax liabilities to build buyer confidence
    • Using financial models to clarify valuation discussions and expedite transactions

Read the full article on Mergers & Acquisitions' website.