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ch04 - Chapter 4 Deal Structuring Deal Issues in Deal...

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Deal Structuring Deal Structuring 4 4 Chapter Chapter
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Chapter 4-2 Issues in Deal Structuring Taxation Accounting Financing Rules and regulations can change dramatically over time Goal of deal structure should be to maximize value
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Chapter 4-3 Taxable vs. Nontaxable Deals General Rule Nontaxable transaction — merger or tender offer involves stock-for-stock transaction Taxable transaction — transaction involves cash or debt
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Chapter 4-4 Taxable vs. Nontaxable Deals Acquiring Firm Target Firm Nontaxable Reorganization NOL carryover Tax credit carryover Carryover asset basis Deferred gains for shareholders Taxable Acquisition Stepped-up asset basis Loss of NOLs and tax credits Immediate gain recognition by target shareholders Depreciation recapture of income
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Chapter 4-5 Types of Nontaxable Deals Section 368: “tax-free reorganizations” Type A Statutory merger — target shareholders exchange stock for shares of acquirer Consolidation — shareholders of both firms receive stock of new company Three-party forward triangular merger Parent creates shell subsidiary
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