Case Studies

Cross-border M&A

The case

A longtime client, founder and CEO of a globally operating group in the marketing/market research business with a focus on Europe called us unexpectedly one Sunday morning. He had just held initial discussions in New York on a merger with a high-growth startup that was particularly active in Asia and the US. Their shared aim was the further internationalization and growth of the two businesses; they wanted to involve a US financial investor to finance further growth. The client told us that the discussions would continue on Monday morning in Germany and asked us to advise on all tax and legal aspects of the project.

Our solution

In the following months a number of tax, legal and political issues had to be solved. Part of our task was to ‘translate’ among the participants – often involving more than just questions of language. The last major point of discussion was the seat of the future holding company of the combined group. Several jurisdictions were shortlisted and reviewed in cooperation with our partner law firms. In the end, the choice was between the Netherlands and Germany. We closely involved our Dutch partner law firm Loyens & Loeff here. After several discussions, it was decided to opt for the Netherlands in the form of a Dutch cooperative (coöperatie).

Following the merger, we conducted several international reorganizations of the combined group ourselves or had them conducted by our partner law firms in foreign jurisdictions under our lead.

Cross-border real estate

The case

Despite an unfavorable capital market environment, a foreign client wanted to float his German real-estate portfolio on the stock exchange. Our solution was to use a reverse takeover. First a suitable German listed real-estate developer had to be identified as a partner. This developer would then contribute its German real-estate portfolio as part of a capital increase from authorized capital.

Our solution

We conducted a due diligence study of the absorbing German real-estate developer with respect to property law and taxation and resolved a number of structural issues related to company law and supervisory requirements. In addition, we optimized the transaction structure in terms of real estate transfer tax, the existing tax loss carry-forwards, and the withholding tax on capital investments of the various parties involved. We not only drafted the highly complex contracts, but also negotiated and optimized them during the project.

Cross-border restructuring

The case

A German corporation came to us with the following problem: A subsidiary with its registered office in Switzerland was to be integrated into the German group. The subsidiary had been set up many years previously as an intermediate holding company for foreign investments, but was no longer needed for that purpose. How, then, could the Swiss subsidiary be transferred to Germany without incurring tax losses in Germany or Switzerland?

Our solution

A cross-border conversion pursuant to the German Reorganization Act or Reorganization Tax Act was not possible because the Swiss AG (a stock corporation) was not an EU/EEA corporation. The idea: Instead, the Swiss AG would retain its identity but move from Switzerland to Liechtenstein. Then the Liechtenstein-based AG would be converted into an SE and move to Germany. We put the idea into practice with the Swiss law firm Homburger and the Liechtenstein team from Sele Frommelt & Partner.

Cross-border corporate law

The case

Two families contacted us because they wanted to restructure their international, historically grown corporate group. Previously they had held all of the companies in the group either directly or via a number of other companies in which either the families themselves or individual group companies held equal shares. It had not been taken into account where the companies were assigned for functional purposes or how they were arranged from a tax perspective.

Our solution

By means of contributions, cross-border mergers, other conversions and group-internal sales, we created a structure that was optimized for business and taxation purposes. Aspects of succession were also considered.

Working closely with the client, we involved consultants from more than 20 countries in the restructuring project. The cooperation with our ‘best friends’ law firms worked so well that we were able to complete the entire process in just a few months.

Transfer pricing

The case

A tax audit of a subsidiary of a US listed corporation raised an objection concerning license fees paid by the German subsidiary to the US parent. The fees were paid for the use of trademark rights, manufacturing expertise and the distribution of technical products. The German tax authorities took a highly aggressive approach and demanded that the fees be reduced from five percent to one percent. As a result, the German subsidiary became subject to considerable profit adjustments that were eventually determined in the form of constructive dividends.

Our solution

We requested a mutual agreement procedure obligating the US and German tax authorities to avoid double taxation resulting from transfer price corrections. We were supported by a team from Alston & Bird, Washington, DC. The outcome of the successful proceedings was an application for an advance pricing agreement. This will ensure legal certainty concerning license fees in the future.

Employment

We recently advised a company with a global footprint on a complex severance procedure concerning one of its top executives. Our task was to dissolve a set of employment contracts that our client’s group companies in the US, the Middle East and Asia had concluded with the executive. The matter also involved an in-depth internal investigation including forensic retrieval and a review of documents and data in order to identify potential misconduct.

We negotiated a global settlement agreement covering all jurisdictions involved and coordinated the activities of local law firms in the US and Turkey.