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Mergers and acquisitions are facts of life in a grocery industry. Chains seek to remake themselves to meet dynamic demographic market changes, while taking advantage of economies of scale that can result from combining operations. However, without considering the role of tax accounting in the M&A process, companies can leave above-the-line money on the table when it’s time to christen the newly grown chain.

In a recent Supermarket News “Viewpoints” article Megan Lusby, Senior Director in the Personal Property Tax practice and David Cockey, Senior Manager in Location & Incentive Strategies offers valuable strategic considerations when it comes to property taxes for chains considering merging with or buying one another. They also point out opportunities that can be available to negotiate incentives that can pay off in the near and long term for the new operation.

For example:

  • Review tax accounting procedures for all of the entities involved, taking the best practices of each, then implementing advanced computer software to meld those practices into a single system that can save time and money when filing annual personal property renditions to various tax jurisdictions.
  • Consider possible advantages in multi-store bargaining power when negotiating with property tax assessors and appeals boards within a tax jurisdiction.
  • Cleansing existing asset ledgers should be part of any remodeling plan generated by a merger or an acquisition. Getting deadwood off the books can generate tax savings that can help fund the remodel – including paying for new, up-to-date fixtures.
  • Consolidating stores and company warehouse and production infrastructure to take advantage of economies of scale also can offer opportunities to negotiate incentives with local and state economic development authorities. Tax rebates, construction grants and education funding are only some of many incentives that can pay off for years into the future, as can a decision to locate a warehouse or production facility in one tax jurisdiction over another to take advantage of lower tax rates.

 

All of these factors, and more, should be part of the due diligence done early in the M&A process. They can help cope with such issues as unsatisfied compliance associated with previously negotiated incentives that can be susceptible to “clawback” provisions, which can burden decisions on relocating new company infrastructure.

Megan and Dave also point out many reasons why a property tax consultant can pay off as part of an M&A due diligence team, which range from extending the economies of scale that drive mergers and acquisitions to taxes that the new company faces.

Read the full article here.

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Megan LusbyLusbybu-state-local-tax personal-property-taxpersonal-property-tax-consultingpersonal-property-tax-commercial-real-estatehunt-valley

Senior Director, Property Tax

Last updated on November 7th, 2019 at 03:36 pm

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