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Corporations

Stefan Oesterhelt

Acquisition financing and structuring

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Workshop on the occasion of the ISIS) seminar on 27 October 2020 entitled "Tax pitfalls in Mergers & Acquisitions transactions".

10/2020
The corresponding case solutions can be purchased for CHF
120.00
(introductory price)
be on sale in the shop
The case solutions and other documents can be obtained free of charge in the shop.

1. initial facts and questions

A private equity fund (offshore fund) wishes to acquire a company domiciled in Switzerland. The seller is a legal entity domiciled in Switzerland. The purchase price is to be raised to a certain extent from the fund's own funds and to a certain extent by external financing (syndicated bank financing and bond).

How should the acquisition be structured?

What should be considered when using a foreign acquisition company?

Acquisition financing Acquisition structuring Acquisition structuring Tax pitfalls Mergers & Acquisitions Transactions M&A Tax law taxlaw Seminar Case studies isis zsis Corporate tax law Target

What should be taken into account when using a domestic acquisition company? What should be taken into account in this respect when reselling the target?

Acquisition financing Acquisition structuring Acquisition structuring Tax pitfalls Mergers & Acquisitions Transactions M&A Tax law taxlaw Seminar Case studies isis zsis Corporate tax law Banks

2. acquisition of foreign seller

2.1 Facts and questions

A person resident in the UK (taxed as a resident but not domiciled person) holds a company resident in Switzerland (SwissCo) through a holding company resident in Luxembourg (LuxCo). A listed US group wishes to acquire SwissCo. The US group already holds further interests in European companies through a Dutch holding company (DutchCo).

What do buyers need to consider when purchasing SwissCo via DutchCo?

2.2 Option 1: Different views on eligibility for the agreement

As is generally accepted, there are old reserves of CHF 300 million. The buyer is of the opinion that 35% of this amount (i.e. around CHF 100 million) should be deducted when calculating the purchase price. The seller takes the view that LuxCo is entitled to the agreement and that no reduction in the purchase price is therefore justified.

How can the problem be solved?

2.3 Option 2: Restructuring after sale

The parties agree that (i) LuxCo is not refundable and (ii) that no old reserves exist.

After the sale, the seller intends to distribute a patent held by SwissCo (value: approx. 50% of the sales price of SwissCo) and also to transfer the foreign investments held by SwissCo to DutchCo.

What should be taken into account?

3. acquisition financing via loan agreement

3.1 Facts and questions

The acquisition is to be financed by a loan agreement under which the domestic AkquiCo and (after the acquisition potentially also Target) will be borrowers. What form does the agreement have to take in order for the loan agreement to be syndicated internationally?

3.2 Option: Collateralisation by domestic real estate

The banks require the loan agreement to be secured by the target's domestic properties after the acquisition.

What must be considered (i) from the point of view of the bank and (ii) from the point of view of the buyer?

4. acquisition financing by bond

4.1 Facts and questions

The acquisition financing is now to be carried out by a bond issued by LuxCo. This bond will be guaranteed and secured by Target and the domestic and foreign subsidiaries of Target.

Acquisition Financing Acquisition Structuring Acquisitions Tax Pitfalls Mergers & Acquisitions Transactions M&A Tax Law taxlaw Seminar Case Studies isis zsis Corporate Tax Law Capital Markets

What tax questions arise?

What should be taken into account from a tax perspective when drafting the guarantee contract?

What would be the consequences of a call on the guarantee against (i) Target, (ii) domestic subsidiary and (iii) foreign subsidiary?

CHF
120.00

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