M&A in turbulent times – how to get the deal done (2024)

Monday 8 April 2024

Report on a session at the 13th annual IBA Finance & Capital Markets Tax Conference in London

Tuesday 16 January 2024

Session Chair

Devon Bodoh, Weil, Gotshal & Manges, Miami and Washington, DC


Guillermo Canalejo Lasarte, Uría Menéndez, Madrid

Amie Colwell Breslow, Jones Day, Washington, DC

Alex Jupp, Skadden, Arps, Slate, Meagher & Flom, London

Stefan Mayer, Gleiss Lutz, Frankfurt

Susanne Schreiber, Bär & Karrer, Zürich

James Somerville, A&L Goodbody, Dublin


Martin Leu, Bär & Karrer AG, Zürich


Devon Bodoh started the session by introducing the panel and going through the session agenda, which focused on four topics in regard to mergers and acquisitions (M&A): (1) redomiciliations, (2) spin-offs and demergers, (3) selected Organisation for Economic Co-operation and Development Pillar Two topics focusing on contractual clauses and (4) transfer taxes. For most of the agenda items, the local special rules and practical takeaways are highlighted.


Amie Colwell Breslow began with a general definition of redomiciliation as the migration of an existing entity from one jurisdiction to another, where the reason for such redomiciliation could be driven by strategic, regulatory, financial and/or tax considerations. There are also two main types of migrations, either inbound (eg, into the United States) or outbound (out of the US). The panel mainly focused on outbound redomiciliation.

The US

With regard to the US, there are two sets of anti-inversion rules, ie, Internal Revenue Code section 367 containing rules potentially taxing share-for-share exchanges on the level of shareholders of US entities and Internal Revenue Code section 7874 causing the foreign entity to be characterised as a US corporation for tax purposes following the share-for-share exchange. Section 7874 applies only if three tests are met (ie, ‘substantially-all test’, ‘substantial business test’ and ‘substantial ownership test’). The primary US tax consequences of triggering section 7874 depend on the continuing ownership threshold for the shareholders of the US corporation, ie, full inversion if the continuing ownership is >80 per cent or limited inversion if the continuing ownership is ≥60 per cent but ≤80 per cent.

The United Kingdom

Alex Jupp recalled that in January 2020, the UK left the European Union but remained subject to EU single market rules for the rest of the year, including several tax directive benefits. January 2021 marked the end of the post-Brexit transition period. Thus, the EU Parent–Subsidiary Directive (Directive 2011/96) and the EU Merger Directive (Directive 2009/133) were no longer applicable for UK resident entities.

In October 2021, the government launched a public consultation on its proposal for a redomiciliation regime. A report summarising the response to the consultation was published in April 2022. The respondents to the consultation paper’s questions preferred that the current central management and control rules (CMC) should be maintained, and the existing loss importation rules should not be tightened. The next steps by HM Revenue and Customs are expected in 2024.


Stefan Mayer pointed out that cross-border conversions or relocations are only possible for German entities within EU countries. Within EU Member States such a transaction would be characterised by the system of exit taxation in the exit state and the step-up of assets at fair market value in the immigration state. This general conversion also applies, accordingly, to transactions involving German entities, where the German exit tax would be at around 30 per cent of corporate income tax (if no permanent establishment remains in Germany). At the shareholder level, generally no tax consequences are triggered if corporate law provides for a continuity of the legal personality (the same principle goes for German transfer taxes).

In case of a conversion, without moving the place of effective management, there should be no income tax consequences at the company, as well as at the shareholder level, provided that corporate law provides for a continuity of the legal personality of the converted company, but the respective company would remain subject to unlimited income taxation in the country of effective management (eg, Germany).


There are no specific Irish tax provisions dealing with the taxation of cross-border conversions or relocations. Thus, the general EU Anti-Tax Avoidance Directive (Directive 2016/1164) rules apply, meaning the application of exit taxation in the case of an outbound conversion (at around 12.5 per cent), but only if the company ceases to be an Irish tax resident. Vice versa, on an inward conversion, provided an ATAD compliant exit tax is applied in the exiting state, a rebasing of the company’s assets would be recognised in Ireland.


Guillermo Canalejo Lasarte presented the Spanish Ferrovial case, where Ferrovial SA, the ultimate parent company of the Spanish Ferrovial group, decided to move its legal domicile to the Netherlands through a cross-border reverse merger with a wholly owned Dutch subsidiary. The reason for the move was to secure better access to financing in a country with a better rating and deeper financial markets (triple listing in the US) and a lower tax burden.

The merger was performed without a capital increase in the Dutch entity, but shareholders in the former Ferrovial SA received shares in the surviving Dutch entity, becoming the groups’ top parent entity. The Dutch entity created a branch in Spain considered as a permanent establishment for tax purposes, to which certain assets, liabilities and legal relations were allocated.

The merger benefited from a Spanish tax neutrality regime (through the transposition of the EU Merger Directive) meaning that capital gains realised by Ferrovial were not included in its corporate income tax base to the extent that they derived from assets located in Spain allocated to the Spanish permanent establishment and, thus, deferring the taxation of embedded capital gains that were inherited by the Spanish permanent establishment of the new Dutch parent entity. Furthermore, no Spanish income taxation was triggered on the level of the EU resident shareholders, subject to meeting certain requirements.

Spin-offs and demergers


A spin-off in the sense of the distribution of stock by a corporation is governed by section 355. Section 355 provides that, if certain requirements are met (including the distribution of an amount of stock of the controlled corporation that constitutes control, control being defined as ownership of at least 80 per cent), a corporation may distribute stock and securities of a controlled corporation to its shareholders and security holders without causing the distributees to recognise a gain or loss.


Susanne Schreiber explained that demergers are a common structuring option for spinning off business units in Switzerland (also for listed companies). In principle, a full spin-off is required, ie, the transfer of all shares in the demerged entity to the shareholders, but recently there have been examples of partial spin-offs, with the demerging entity holding a minority interest in the demerged entity.

Provided certain conditions are met, such a transaction could benefit from tax neutral treatment for Swiss corporate income tax, stamp duty and withholding tax purposes. The requirements include, among others, continuity of taxation in Switzerland, the transfer of a business unit at book value and a dual business requirement for the transferer and transferee. In addition, it could be tax neutral for Swiss resident shareholders and would not trigger any blocking periods, ie, a demerger followed by the sale of the shares is possible without negative Swiss tax consequences.

Pillar Two

Devon Bodoh highlighted that within M&A transactions the focus is shifting to how to ideally cover Pillar Two-related questions in share purchase agreements, ie, not only the allocation of the respective tax risks via indemnity clauses, but also in regard to tax representations to fulfil disclosures regarding the Pillar Two Model Rules (also referred to as the Global Anti-Base Erosion or ‘GloBE’ rules).

Transfer taxes

Selected panellists presented the pitfalls of transfer taxes in their respective jurisdictions.


According to the new Internal Revenue Code section 4501, enacted in 2021, a non-deductible one per cent excise tax is imposed on the repurchase (directly or indirectly) by a US corporation of stock of a publicly traded corporation (provided certain requirements are met, also foreign companies might be affected). New guidance is expected to be issued by the Internal Revenue Service in 2024.


Germany levies a real estate transfer tax (RETT) on the taxable value of German situs property on the transfer of shares in a German company owning such property. The tax rates range from 3.5 per cent to 6.5 per cent.

In principle two rules need to be considered:

  • the first rule: a unification, directly or indirectly, of 90 per cent or more of the shares in a company holding German real estate triggers the RETT at the level of the acquiring entity (or group of acquiring entities); and
  • the second rule: the transfer of 90 per cent or more of the shares in a company holding German real estate within a period of ten years triggers the RETT at the level of the company.

Intra-group transfers are generally not exempt (with very limited exceptions), but stock exchange transfers would not be considered harmful transfers under the second rule. The signing and closing of a share deal triggers the RETT under the first rule (at signing) and the second rule (at closing), so potentially leading to multiple RETT applications within the same transaction. Recent guidance from the German tax authorities provides for double attribution of one and the same piece of land (to different entities within a group of entities).


The Swiss securities transfer tax is applicable to the transfer of Swiss or foreign securities (eg, listed or non-listed shares, bonds, fund units) against a consideration with a Swiss securities dealer acting as party or intermediary. Typical securities dealers are Swiss (investment) banks, Swiss incorporated entities holding more than CHF 10m book value in securities (eg, a Swiss holding entity or ultimate parent entities).

The transfer tax is paid by the securities dealer involved but is usually to be economically borne by the parties (the allocation of the securities transfer tax is subject to negotiation). In a recent court decision, Swiss M&A advisors and Swiss holding companies were considered to be securities dealers for Swiss securities transfer tax purposes, respectively, having acted as intermediaries in transactions with foreign parties.


Irish stamp duty is charged on the transfer of Irish assets (including listed and non-listed shares) and documents executed in Ireland, which relate to Irish assets. The stamp duty rates vary from 1 per cent (for shares) to 7.5 per cent (for non-residential assets). There are exemptions such as for the transfer of assets between associated companies (90 per cent relationships), for American depository receipts (ADRs) and Irish company shares listed in North America and cleared in the US, for transfers of intellectual property or for a number of financial services-related transfers (eg, the securitisation of company bonds and debt factoring).


New draft UK legislation was published in October 2023 proposing to remove the 1.5 per cent stamp tax charge on issues, and certain transfers, of securities to depositary receipt systems and clearance services. These provisions are likely to be enacted in Q1/2024, with commencement from 1 January 2025.

Bodoh then closed the panel, which provided a good overview of recent tax developments in turbulent M&A times.