• 03Nov

    The Netherlands in search for € 18 billion through limitation of interest deductibility on acquisition debt

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    Introduction

    29.983.000.000 EUR (5,2% of GDP), that is the number on which the Dutch government’s deficit landed in 2010.[1] In order to seal this gap, the Dutch government recently announced a plan containing a variety of structural measures to save up to € 18 billion between 2012 and 2015.[2]

    Specific for the M&A field, one topic catches the attention: the restriction on the deductibility of interest on acquisition debt in a fiscal unity as from 1 January 2012.

    What does it mean?

    Under the current legislation, it is common practice that following an acquisition the leveraged acquiring company (holding) enters into a fiscal unity with the former Target, mostly an operational entity. The fiscal unity provides that income and cost from both companies can be offset against each other. Doing so, the tax base of this Dutch operational Target erodes due to a ‘debt push down’.

    The new law wants to discourage such constructions. It imposes that the interest cost relating to the acquisition debt can only be offset against the taxable income of the acquiring (holding) company to the extent it does not exceed the taxable profit of this acquiring (holding) company. It will no longer be possible to offset the interest expenses of the acquisition debt against taxable profits of the acquired company. Hence, due to this exception on the Dutch fiscal unity a ‘debt push down’ will no longer be realised.

     The amount that is not deductible is the lower of (i) the excess interest expense minus 1m EUR or (ii) the result of the formula: total acquisition interest expenses * (excess debt / total acquisition debt). The amount that could not been offset in a given year can be carried forward.

    Exceptions

    The interest cost of the acquisition debt remains deductible when the debt/equity ratio of the fiscal unity does not exceeds 2:1 or, as mentioned above, when the interest cost of the acquisition debt is less than 1million EUR.

    Conclusion

    In order to safeguard the tax deductibility of interest on acquisition debt, proper debt structuring is (and remains) key.

    P.S. Other measures

    It should be pointed out that the Dutch Budget 2012 also includes proposals in respect of (i) the Dutch tax exemption on non-Dutch permanent establishments, (ii) substantial interest rules (ii) and dividend withholding tax relating to Dutch Cooperatives.

    Further information can be found on: http://www.pwc.nl/nl/prinsjesdag/index.jhtml

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  • 17Oct

    Emerging opportunities: Financial Services M&A in Asia 2011

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    Globally, financial services are undergoing unprecedented change.  At the same time, the eastward shift of economic power gives Asian financial services markets stronger growth potential than that of any other region.  As a result M&A is becoming an ever more important strategic tool for financial institutions in Asia.

    Report key findings:

    • Economic and demographic factors will drive strong growth in Asian financial services
    • Domestic M&A looks set to remain the key driver of Asian financial services transactions
    • Cross-border M&A in Asian financial services is expected to accelerate.  Bidders from more mature markets such as Australia, Japan, Korea and Singapore are being joined by European and American rivals.
    • Capital restrictions are seen as the leading obstacle to M&A in the region, while talent management is seen as by far the greatest challenge for post-deal integration
    • Despite regulatory and governmental activity, Asian financial services M&A is predicted to grow through 2011 and into 2012

     For more details, please check: http://www.pwc.com/gx/en/mergers-acquisitions-industry-trends/survey/index.jhtml

    Download the full report: FS M&A Asia 2011 

     

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  • 16Feb

    Debt Market Update – Q1 2011

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    Simon Boadle, Head of Debt Advisory, said “Though 2010 was not without significant hurdles including the euro-zone debt crisis, the debt markets found a path through to post a strong year with a robust pipeline entering Q1 2011.”

    The high yield market continued to lead the way with record issuance driven by investor demand for yield and borrowers need to refinance debt. The leveraged loan market witnessed a strong recovery; however, the bulk of loan issuance has been used to refinance existing debt rather than to support M&A activity.

    Refinancing was a principal driver of activity in the corporate loan market. Leveraged and corporate loan market participants are hopeful of increased M&A activity in 2011 as cash rich corporate borrowers and private equity houses take advantage of more buoyant debt markets and the improved global macro environment.

    The sheer volume of borrowers needing to refinance in the coming years suggests that companies should begin to plan their refinancing strategy now. The more highly leveraged companies need to consider how they can reduce their debt to levels capable of being refinanced in the current market.

    For more info, check the latest Debt Market Update Q1 2011

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  • 22Oct

    Debt Markets Update Autumn 2010

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    Despite previous uncertainty in the debt markets, Central Banks continue to be proactive to limit the chances of a double dip recession. The UK corporate loan market was lifted by the return of large cap M&A, with banks providing strong support for BHP Billiton’s bid for Potash Corp through a US$45 billion loan facility. Strong, positive momentum in the leveraged market during September bodes well for the remainder of the year.

    Competition from the bond market is pushing up total debt multiples, in some cases to over 5x, whereas in the mid market total leverage is typically up to 4.25x. The corporate bond markets rebounded after the short lull in Q2 and our view is that the bond markets will continue to increase their overall share of financing activity.

    In contrast to these buoyant levels and the recovery in leveraged finance, other credit markets are more subdued. This issue has a special focus on Project and Infrastructure Finance where despite a long-term need for infrastructure projects, demand for new finance has been dampened in the short-term.

    Simon Boadle, Head of Debt Advisory, said “Despite specific issues in certain sectors, sentiment in the credit markets has generally improved and the short term outlook for the availability of debt finance is positive.”

    For more details, check out the latest Debt Markets update from our UK colleagues -  Debt Markets Update Autumn 2010

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  • 14Oct

    M&A Academy: General trends in global M&A and the rising influence of Emerging Markets

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    Our fourth season of the M&A Academy took off today, the 14th of October. We started with a session given by Chris Hemmings, Global Head of Corporate Finance who talked about general trends in global M&A and the rising influence of Emerging Markets.

    Some key messages we learned during this presentation is that Western companies are proactively seeking access to growth markets; that private equity continues to struggle, yielding opportunities for companies; and that emerging market buyers are seeking market advantage and margin.

    Download the presentation General trends in global M&A and the rising influence of Emerging Markets.

    More info about the M&A Academy season (programme, subscriptions, etc.).

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  • 15Sep

    Book – Tax restructuring in the EU

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    Whether you’re making an acquisition or looking for opportunities to simplify your group structure within the EU, this guide is intended to help you navigate the complexities of cross-border reorganisations. The book provides information on the technical fiscal aspects of the directive and an overview of its implementation within each member state. You will also find detailed country chapters, which facilitate comparison of the different rules in operation within each jurisdiction.

    Find out more about our new book  on how to simplify your group structure in the EU: ‘ Tax Restructuring in the EU‘.

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  • 03May

    M&A Academy: “HR Integration after a merger, a practical example”

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    The 7th and last session of this year’s M&A Academy cycle took place on 29 April looking at “HR integration after a merger”. Turbulent economic times are making many organisations undertake a transaction, whether a merger, an acquisition, a divestiture, a carve-out or a spin-off. Every transaction creates turmoil, uncertainty and opportunities for people.

    Peter De Bley, Partner at PwC Belgium, introduced the subject before handing over to our guest speaker, Wim De Wit, HR Director, retail & private banking Belgium, BNP Paribas Fortis, who presented his views on the strategic added value of HR in times of changes and the future challenges for his company.

    Download the presentation: “HR integration after a merger”

    More info about the M&A Academy season (programme, subscriptions, etc.).

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  • 26Mar

    M&A Academy: “How can real estate become a financing means for your company today?”

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    Market studies chave shown that over the last years the total accounting value of all lands and buildings of the 30.000 biggest BelCo’s amounts to EUR 50 billion. When you know that the market value of said assets equals minimum 3 times their accounting value, this represents a dramatic hidden value in the current market environment. Indeed, when companies face difficulties to access the capital market, releasing such potential should be high on their agenda. In a broad sense, this can involve OpCo-PropCo structures either internally or externally financed, straight disposals, or joint-ventures with professional real estate investors.

    During the sixth session of our M&A Academy on Thursday, 25 March, we shared with you how to free up cash from real estate, by tackling the corporate tax, VAT and registration duties matters to be taken into account while splitting up real estate from operational structures. We led you through the current environment, pitfalls and opportunities of this developing market.

    Download: “How can real estate become a financing means for your company today?”

    More info about the M&A Academy season (programme, subscriptions, etc.).

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  • 02Mar

    Simplification of merger procedure

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    Since 25 January 2010, it is possible to carry out all types of mergers without the intervention of an independent expert (i.e. the company’s statutory auditor, or an auditor/external accountant if no statutory auditor has been appointed).

    Articles 695 and 708 of the Belgian Companies Code (“BCC”), modified following implementation of the European Directive 2007/63/EC, now provide that no independent expert’s report on the merger proposal is required, if all shareholders (and holders of other securities conferring the right to vote) of each of the companies involved in the merger, have so agreed.

    Prior to such modification of the BCC, it was only possible to carry out a so-called “parent-subsidiary merger” without the intervention of an independent expert (i.e. a merger whereby the acquiring company already held all shares of the acquired company).

    The report of the management bodies of the companies involved in the merger is however still required (articles 694 and 707). The new European Directive 2009/109/EC provides for the possibility to also abolish the requirement to draw up such report. For the time being however, this Directive has not yet been implemented in the BCC, and it is not yet clear whether the Belgian legislator will seize the opportunity to further reduce the burden of formalities for mergers.

    For (partial) demergers, the intervention of an independent expert remains required, more in particular for the drawing up of the report with respect to the contribution in kind (articles 602 and 313 BCC). If all shareholders (and holders of other securities conferring the right to vote) of each of the companies involved in the (partial) demerger so agree, no additional independent expert’s report on the (partial) demerger proposal will be required.  This was however already the case prior to the recent modification of the BCC.

    Karin Winters, Director Corporate & Commercial Law
    Bart Vanstaen, Senior Legal Consultant

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  • 25Feb

    M&A Academy – “Tax implications of business restructuring”

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    2008 and 2009 are challenging times for the M&A market due to the lack of available funding. Many investors and international groups are looking for cost-cutting opportunities and cash optimisation.

    During the 5th session of our M&A Academy, we tried to evaluate how reshaping your conventional business model towards a more flexible structure can help you in for example the improvement of your business model or the optimisation of your tax credits and/or cash position.

    Since business restructurings trigger multiple tax issues, not only transfer pricing aspects, this module also focused on the following aspects:

    • the arm’s length risk allocation to restructured group entities;
    • the potential ‘exit charges’ and indemnifications upon restructuring;
    • the recognition, by tax authorities, of restructuring transactions.

    Download “Tax implications of business restructuring”

    More info about the M&A Academy season (programme, registrations, etc.)

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