Global merger and acquisition (M&A) activity is heating up for private equity (PE) portfolio companies focused on driving long-term value for investors. Once a transaction is completed, portfolio companies should quickly turn their focus to executing the recommended items on their 100-day plans, which outline post-deal action items that will drive value creation. By proactively addressing these items, companies can reduce costs, increase productivity and improve efficiency, all while ensuring alignment between their current and future strategic goals.
One major consideration that shouldn’t be overlooked is the critical role of effective tax planning in post-close value creation. With the guidance of a knowledgeable global tax advisor, portfolio companies can effectively implement tax positions and strategies to attain both immediate and long-term tax benefits.
Here are several approaches that portfolio companies can use to jump-start value creation in cross-border deals.
Optimize global operational processes
Enhance global supply chain efficiency by assessing global trade activities
Portfolio companies can enhance their operational efficiency, manage risks and reduce costs by strategically assessing their supply chain networks. Specifically, focusing on cross-border customs and international trade operations—often overlooked during pre-deal diligence—can yield significant benefits. By evaluating a global supplier base for factors like performance reliability, cost-effectiveness and agility, companies can achieve substantial savings and build resilience. Additionally, integrating advanced technologies to analyze data, enhance visibility and streamline processes within the supply chain network can improve accountability and elevate overall performance.
Identify international indirect tax opportunities
Examining a company’s existing value-added tax (VAT) registration footprint can help pinpoint improvements that could alleviate the administrative burden of compliance requirements while simultaneously cutting costs and mitigating associated risks. Improvements in this space could include outsourcing VAT compliance work or automating specific VAT functions. Moreover, portfolio companies should continue to monitor international VAT regulatory revisions that could affect their existing obligations, such as the ongoing implementation of e-invoicing mandates worldwide.
Rationalize redundant or unnecessary entities within a global structure
Legal entity rationalization can be transformative for portfolio companies by streamlining operations and optimizing resource allocations, leading to enhanced financial performance. Legal entity rationalization is about making sure the global structure reflects the global strategy; by focusing on core competencies and minimizing unnecessary legal complexities, portfolio companies can better navigate the global market and pursue strategic growth opportunities with greater agility and clarity.
Analyze permanent establishment risk globally
By understanding the potential permanent establishment considerations, portfolio companies can make informed decisions regarding market entry, expansion plans, acquisitions and other strategic initiatives. In addition, portfolio companies can reduce their exposure to income tax filings and costs and build stakeholder confidence by demonstrating proactive management of permanent establishment risks globally.
