Practical Guide to Mergers, Acquisitions and Business Sales

This Guide is Organized in a Logical Progression of the Topic as Follows:

• Chapter 1 discusses the basic decisions involved in structuring the sale or purchase of a business.
• Chapter 2 provides a concise comparison of the tax differences among the common types of U.S. business entities, including C corporations, S corporations, LLCs, partnerships and sole proprietorships; and it discusses how each business organization is taxed, especially when it engages in an acquisition transaction.
• Chapter 3 addresses tax planning for a sale of business assets by a sole proprietorship. This discussion is useful not only in its own right, as sales of sole proprietorships are common, but is also the building block for discussing asset acquisitions of other types of businesses. Chapter 3 explores the tax character of various business assets, the classification of assets under Code Secs. 1221 and 1231, the recapture rules under Code Secs. 1245 and 1250, and the purchase price allocation rules under Code Sec. 1060. The chapter also examines the related issues of how the Seller can minimize tax costs, and how the Buyer can enjoy the maximum tax benefits, in an asset purchase.
• Chapters 4, 5, and 6 collectively examine the issues arising from the purchase and sale of a C corporation. Chapter 4 discusses asset purchase transactions. Chapter 5 examines the alternative of a stock purchase. Chapter 6 explores the techniques for deciding whether an asset sale or a stock sale is most appropriate for a given acquisition transaction.
• Chapter 7 examines the rules that apply to a tax-free acquisition transaction, including the various alternative structures under Code Secs. 368, 351 and 721. It defines how to structure a tax-free reorganization and discusses the circumstances in which tax-free exchanges of equity are likely to make sense.
• Chapter 8 discusses unusual or hybrid forms of acquisition transactions, ranging from partially tax-free and partially taxable, to unusual or exotic methods of implementing conventional transactions, and explores some of the circumstances in which these alternative structures can be employed.
• Chapter 9 explores acquisition strategies for an S corporation and contrasts such acquisitions with acquisitions involving C corporations.
• Chapter 10 examines the sale of a partnership and contrasts the taxation of such sales with the taxation of sales of C corporations.
• Chapter 11 addresses the tax consequences of structuring deferred and contingent payment arrangements, including the numerous pitfalls and traps that arise when business people and corporate lawyers structure transactions without tax advice.
• Chapter 12 examines the complexities of Code Sec. 197, which governs acquisitions of intangible assets. The modern economy is based increasingly on intangible forms of wealth, ranging from intellectual property to contract rights to goodwill. This chapter explains some of the choices and strategies that can maximize tax benefits in an acquisition involving intangibles.
• Chapter 13 explores Code Sec. 338 elections, notably the 338(h)(10) election that has become extremely popular when the target is an S corporation. An asset acquisition is the default strategy from a Buyer's perspective, but many Buyers are increasingly willing to buy the stock of a Target Corporation (assuming the existing liabilities, but also avoiding the tedious chore of transferring title to assets), so long as the tax result is the same as an asset purchase. This chapter also discusses in significant practical detail the drafting of a 338(h)(10) gross-up provision in a P&S Agreement, and how such provisions work in a real-world transaction.
• Chapter 14 addresses the world of loss corporations, and the rules and limitations on the use of losses by an acquirer under Code Sec. 382.
• Chapter 15 recognizes that it is possible to sell corporate stock to the issuing corporation through a partial or complete liquidation. In effect, the corporation in appropriate circumstances can be its own Buyer. This chapter also examines corporate redemptions under Code Sec. 302 and the rules that determine whether a transaction is a capital gain transaction or a dividend. It also examines the diminished importance of such characterizations under the current tax law.
• Chapter 16 examines shareholder buy-sell agreements, which are an important and indeed ubiquitous arrangement for the sale of stock, especially among owners of closely-held businesses. Since the parties to these agreements are often related, an advisor must be familiar with the rules under Code Sec. 2703 and the tax effect of such agreements.
• Chapter 17 addresses consulting and non-compete payments, the back-door method for purchasing a business. In most closely-held businesses, the selling owner is also the key employee, so deciding how much of the total consideration is allocable to consulting and non-compete payments is an important art.
• Chapter 18 focuses on two other common methods of selling a business to its employees -- a leveraged buyout (LBO) and an employee stock ownership plan (ESOP).
• Chapter 19 explains the tax deferral and reduction benefits under Code Secs. 1031, 1033, 1045 and 1202.
• Chapter 20 discusses the special tax issues encountered when buying and selling intellectual property.
• As the title of this new work suggests, this book provides the reader with a working, practical guide to purchasing, selling and merging businesses. Tax advisors, business consultants, business owners and students will all benefit from the real-world, straightforward and pragmatice guidance from Mr. Darby.