Madeline Gowlett (Travers Smith) answers a query on the tax consequences of break fees in the context of M&A transactions.
Question
When are break fees appropriate in the context of M&A transactions? And what are the tax consequences of such fees for both parties?
Answer
When UK private companies are bought and sold it is common for buyers and sellers to enter into exclusivity agreements at a stage in the process when an outline commercial agreement has been reached. These agreements will typically prevent the sellers from engaging with alternative buyers for a given period of time (and may impose financial penalties such as break fees if they are breached) such that the buyer can incur the material costs associated with bringing a deal to a close without fear of being gazumped.
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Madeline Gowlett (Travers Smith) answers a query on the tax consequences of break fees in the context of M&A transactions.
Question
When are break fees appropriate in the context of M&A transactions? And what are the tax consequences of such fees for both parties?
Answer
When UK private companies are bought and sold it is common for buyers and sellers to enter into exclusivity agreements at a stage in the process when an outline commercial agreement has been reached. These agreements will typically prevent the sellers from engaging with alternative buyers for a given period of time (and may impose financial penalties such as break fees if they are breached) such that the buyer can incur the material costs associated with bringing a deal to a close without fear of being gazumped.
This approach is not possible in the context...
If you or your firm subscribes to Taxjournal.com, please click the login box below:
If you do not subscribe but are a registered user, please enter your details in the following boxes:
