Taxable Acquisitive Deal Structures for C Corporations

Abstract

This technical note outlines the consequences to the acquirer, target, and the target's shareholders from a basic taxable acquisition of C corporations. Specifically, asset acquisitions, stock acquisitions, and 338(g) elections are covered. A numerical example illustrates the calculation of the after-tax proceeds to the target's shareholders and the after-tax cost to the acquirer. Excerpt UVA-F-1875 Jun. 25, 2019 Taxable Acquisitive Deal Structures for C Corporations Introduction You lead a company and want to expand. You have a target (T) company in mind, and your team has estimated what T's stock may be worth. You know the estimate is merely preliminary because the structure of the deal affects the ultimate “value of the deal” to both parties. A key factor that affects the ultimate value of the deal to the parties is the tax consequences. Before you determine the price you are willing to pay, there are two questions to ask that highlight the tax consequences of the deal for T and for the acquirer (A) (see Exhibit 1 for a summary): What are T's shareholders receiving (cash or stock)? . . .