Sell-Side Tax Considerations - Three Best Practices to Maximize Deal Value

March 2019

Alexander Mayberry, Tax Senior Manager – Transaction Advisory Services, BDO USA, LLP
B. Nathaniel Collins, Partner – Transaction Advisory Services, BDO USA, LLP

2018 proved to be a strong year for the domestic M&A market, and the outlook for domestic M&A activity in 2019 remains positive despite investor concerns regarding U.S. trade policy and economic uncertainty. Abundant cash, unprecedented equity valuations, and low interest rates are expected to continue to fuel a robust deal market for both corporate buyers and private equity groups. These market indicators appear to signal that 2019 may remain an optimal time to sell.

M&A has not only been fueled by an abundance of capital but has been driven in large part by the disruption created from technology and innovation. This disruption has created a sense of urgency to streamline corporate structures, reduce complexity, and focus on core activities. As a result of this rapid transformation among industries, geographies, and organizations, many businesses are considering divesting of non-core activities in an effort to focus resources exclusively on core operations. Dispositions of non-core business lines has also been fueled by U.S. tax reform, as a lower U.S. corporate income tax rate has reduced the tax leakage resulting from divestitures. 

These changes in the economic landscape and market conditions will result in many businesses and investors selling during 2019. As sellers prepare for a transaction, a thorough understanding of the tax aspects of the disposition is critical in order to maximize after-tax proceeds and ensure a timely and efficient deal process...