Study On Firms' Tax Planning In Mergers & Acquisition

Mergers & acquisition is one of the most important ways to relocate the society resources, which has been more and more popular in the companies of China since 1990s with the studies on M&A. In those studies the factor "tax" hasn't been paid enough attention to, however different ways of M&A lead to different tax burden and different tax pattern, and the tax factor impacted the whole process of an M&A. Of course, a thoughtful tax planning will reduce the cost and generate the benefits for the companies involved in an M&A. That is the basis of this thesis which shows a detailed study on the tax planning in an M&A, aiming to help the involved companies get M&A legitimate interests through thoughtful tax plannings.The thesis can be divided into five parts. The first part is about the background of studying tax planning, its significance, and the related studies before. The second part is the theory basis of this thesis: first it explains the concepts of M&A and tax planning, then it combines those two and discuss where tax factor has its influence during an M&A.The third part introduces the practice of tax planning during M&As in China, including several respects: first we found, most of the companies have reactions to the tax polices, from which we can get that they have considered the tax factor when making the M&A decisions. Although recognizing tax's impact, the companies in our country is not so familiar with tax planning, only 17 of 191 cases that we researched showed signs of tax planning. However, those 17 cases got quite good tax interest. By calculating the tax interest to the whole cost of the M&A, they got an average benefit of 9.55%, which is close to the data of America. We should also notice that the planning methods of the 17 cases have mostly focused on using object's profit losses, not other more beneficial ways. In a word, this part points out successful tax planning do good to involved companies, but the firms in our country haven't think thoughtfully about this question, therefore, it's necessary to discuss how involved company should practice tax planning during an M&A.The fourth part analysis true M&A cases and studies how involved companies implement tax planning during the four steps of the M&A. First in object-choosing step, company in special industry or area may reduce tax; when the object company has profit losses, there is also a way to avoid the losses being wasted. Second when paying the M&A fee, the company should know that share is better than cash, because the former has no income tax. Third in funds-raising, the debt (especially from bank) is the best if the company has light debt burden. At the last step of integration after an M&A, the company should choose "pooling of interests" way to get better statements.The fourth part also points out that the aim of tax planning is not just to lighten the tax burden, but to cut down the whole fee and generate more benefit to the company, therefore the plan should be made after a study on the interference on the whole operation.The fifth part is the conclusion which reviews the important work and the new ideas of the thesis. It also points out the weaknesses and the outlook for further studies.