This was a very complex deal augmented by a significant pre-sale restructuring of the target group, which was also undertaken by haysmacintyre, to remove non-core companies just prior to sale. This included designing the restructuring steps so that there were no downsides to the EMI status of employee options. Furthermore, the US buyer’s tax qualifying status introduced its own pre-sale structuring issues that we resolved with ultimately a simple solution.
haysmacintyre advised on the sale of a UK group to a US private equity buyer. The deal value of up to £35m consisted of cash, buyer’s equity and earn out. We delivered detailed sales tax support throughout, including:
- Implementation of EMI options (HMRC valuation, legal documentation, HMRC reporting) in the run up to seeking a sale.
- Comprehensive analysis on whether shortening the Target’s year end increased the value of its tax attributes for the vendor shareholders (their total cash value equating to circa £3m).
- Drafting of tax asset schedule of the share purchase agreement (SPA), including EMI share option deduction relief, R&D, tax losses and US tax assets.
- Assisted in answering specific tax due diligence queries, including analysis of past share acquisitions by employees/directors to demonstrate that no significant tax risk existed, despite absence of US Section 431 income tax elections.
- Advice on US buyer acquisition structure (consisting of a chain of LLCs) and the risks to the vendor shareholders in qualifying for Capital Gains rollover.