When entertaining discussions about mergers and acquisitions ( M&A ), due diligence practices as they pertain to the state tax side of a deal are a key item. We frequently consult with clients that are in the process of either acquiring another company or looking to be acquired. In either case, the client wants to be aware of any potential state tax exposure areas so they can move forward appropriately and correctly negotiate the deal.
Often however, the due diligence process is the first time the company has addressed the multi-state landscape. Sometimes M&A deals fall apart because a target company does not have its sales tax house in order. If a suitor company does its due diligence and finds significant exposure related to years of non-compliance with sales tax collection or income tax filing, it can either derail an entire deal or significantly impact the purchase price.
What Are Some Due Diligence Questions To Ask If A Company Is Being Acquired?
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