Taxes and the Merger Decision

Download or read book Taxes and the Merger Decision written by Alan J. Auerbach and published by . This book was released on 1986 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: One motive that is often cited for merger activity is the avoidance of federal income taxes by corporations and their shareholders. Yet there is little empirical evidence on the tax consequences of merger activity, or on the postmerger effects on firm policies of tax motivated mergers. In this paper, we present some initial results based on a large sample of mergers and acquisitions that occurred over the period 1968-83. We find that, in about one fifth of all mergers, there was a potential gain from the transfer of unused tax losses and credits, with an average value of approximately ten percent of the acquired company's market value. Other tax incentives to merge are also measured, but found to be less important quantitatively