Tax Risk
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How do valuation firms think about the risk to changing corporate tax rates when evaluating a company, and how does the potential for a rate change impact valuation if at all?
It is really dependent on the relevant countries, timing of expected tax rate changes, and buyer timing to execute the deal. A good advisor can provide the likelihood of rate change and outline the relevant set of risks between acting now and waiting.
The seller will typically indemnify for any outstanding past taxes, but a changing tax regime or structure should be on the buyer. That’s one of the reason deals trade on EBITDA, becuase the capital structure is likely to change and be drastically diffrerent under newco. If the seller will now be international under newco,it is not on them to bare the cost associated with that, since they are not the ones choosing this new tax strucutre. Again, considerations for the buyer.
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