Hidden Tax And Legal Tribulations In Fair Value Measurements For Acquisition Accounting
The organizational structures around M&A activity vary widely; acquisitions are often contemplated and executed by a small team of business-development specialists with limited input from the rest of the organization. Even though tax and legal specialists are frequently involved in the due diligence process, after the deal is completed, the post-close team is often restricted to a smaller group of operational and financial reporting managers as the acquirer focuses on the difficult task of integration and limits the involvement of the larger organization.
A thorough due diligence process that evaluates the key elements of a transaction may not consider the developments that occur post-close. One of the major post-close tasks is the acquisition valuation work that is generally not undertaken until after the due diligence report is completed. The valuation work, frequently developed without the benefit of the diligence report, is overseen by the financial reporting group, who may be unaware of the tax planning strategy or the concerns of the legal department. The result can be the memorialization into the valuation work of facts and assumptions whose impact is not known by those responsible for reviewing the draft analysis.
The Metropolitan Corporate Counsel
December 2012 Issue
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