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The importance of pretransaction sell side SALT due diligence

ARTICLE | September 19, 2021

Authored by RSM US LLP

This article was originally posted on January 12, 2017

There has been considerable merger and acquisition activity in the past few years, especially in the middle market. Coupled with the significant multiples being paid for businesses, this activity has owners eyeing the market and wondering if it’s time to sell their businesses before the next economic downturn reduces the value. Whether the owners are individuals holding businesses that have been in their families for years or private equity firms, the goal is to maximize the value of the entity being sold.

Although the objective may seem simple, achieving it requires substantial time and effort. While the main focus in a transaction is generally on a selling company’s financial statements, there are many components that affect those financial statements. State and local taxes often don’t get much attention, but can nonetheless have a substantial impact on the economics of a deal.

In this article, first published in Tax Analyst's State Tax Notes, authors John Wojcik and John Wozniczka discuss how pre-transaction state and local tax due diligence can help companies and individuals selling a business:

  • Identify and remedy tax exposure before a sale
  • Maximize purchase price
  • Understand the costs and benefits of common transaction structures

Sell-side state and local tax due diligence can be highly advantageous to a selling entity. It is a proactive approach, which puts a seller in a better position to discover potential tax issues, control the way to resolve any issues and maximize the expected returns when selling a business. By properly preparing for a sale through pre-transaction sell-side tax due diligence, a seller can fix issues before they arise.

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This article was written by John Wojcik, John Wozniczka and originally appeared on Sep 19, 2021.
2022 RSM US LLP. All rights reserved.

The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

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