M&A pros and cons

If your company is on the market or you’re considering an acquisition, consider your options carefully. Depending on which side of the deal you’re on, there are tax considerations you may not have thought of.

Michael Petracca, managing partner of the Columbus PricewaterhouseCoopers office, says the buyer and seller in a given transaction may be at odds as to how to transact the deal because of differing tax consequences.

“Sellers want to sell shares of stock, while the buyers want to buy the assets of a company,” says Petracca.

He says there may be unfavorable results for someone buying shares of stock.

“When you buy stock, you step into the shoes of the shareholder,” says Petracca. “That can cause problems because you are assuming all known and unknown liabilities.”

Once the seller has the cash, there may not be a way to get restitution for unforeseen liabilities. One way to deal with this possibility is to extract indemnification through a cash escrow to cover potential losses.

On the other hand, as a buyer, when you purchase a company’s assets, the transaction is taxable to the seller, while selling company shares is not.

Keep in mind that when purchasing a company’s assets, each client under contract must resign that contract. If an important client says no, it could be a major blow. You don’t have to worry about that with a stock transaction. So which is the best way to go? That depends on the situation.

“The buyer needs to determine what is best,” says Petracca. “Is the stock as valuable as cash? Is it better than cash? It becomes a business decision.” How to reach: PricewaterhouseCoopers, (614) 225-8700 or www.pwcglobal.com