Transaction Analysis

We have often been asked by clients to apply our expertise in corporate governance, accounting, and finance to analyze a transaction or a set of transactions that has significant tax ramifications. One issue we have frequently been asked to address is whether the transactions at issue had a valid business purpose, setting aside all or part of any unusual tax benefits. In performing such analyses, we have examined whether the investment instruments or business arrangements in question had reasonable upside relative to alternative investments or arrangements. For example, our experts have evaluated a stock option’s potential profitability or hedging benefits to determine whether there was a legitimate business purpose associated with the option as an investment, leaving aside any unusual claimed tax benefits. We have also evaluated the economic substance and business purpose of tax shelter arrangements such as Son of Boss, LILO, and SILO transactions.

Our rigorous analysis of transactions and their related tax effects draws on our expertise in:

  • Valuation, especially of complex derivative instruments
  • The mechanisms underlying various tax shelters, including sale leasebacks and other instruments related to potential artificial investment losses
  • Analysis of market dynamics
  • Accounting and financial statement analysis
  • Transfer pricing
  • Assessment of the economic rationale for creating or changing certain organizational forms and structures, including the rationale for creating parent-subsidiary relationships
  • Corporate governance principles and application, including the locus and exercise of control by owners and managers
  • Analysis of accounting data, including large, complex datasets downloaded from the accounting systems of major international firms