In conversation with: Max Torpy

Transcript

So my name's Max Torpy and I'm a Deals Tax Market Leader for PwC in the UK.

I lead a team of about 40 partners and nearly 400 staff across the UK. We work with clients ranging from listed and privately owned companies, private market funds invested across all asset classes, as well as management teams and portfolio companies. And we advise our clients on all types of deals and throughout the investment life cycle, from fundraising through to deal execution and post deal implementation of a value creation plan.

Personally, I've worked with clients across those asset classes throughout my career. Right now my main focus is on private equity funds, so I'm working with clients currently on take private transactions, exits including pre exit planning to separate businesses, as well as helping clients think about how they respond to international reform from the OEC and the EU.

First thing I would say is that it's really important that the tax department, that the tax team has a seat at the table as a business partner with the corporate development team. So that the tax team and their advisors can really understand what the investment thesis is, what the value creation plan is, so tax can be accretive to that journey.

So that might be, for example, you're looking to set up a new head office, how to tax optimise that. Or the plan might be to spin off part of the business, and it's really important to understand early on whether there's going to be a tax cost doing that. Or it may be that the plan is to exit the business for an IPO, and again is there planning or thinking that can be done upfront that can really add value to that transaction.

I think secondly I would say, it's important to think really broadly about the stakeholders in a transaction, whether that be the vendor, the management team, and try and anticipate and understand what some of their tax concerns may be. Because if you can help solve those, it can really unlock value in a deal and help make a deal happen that might otherwise not.

A transaction, a deal is an opportunity for tax optimisation, but in that case, it's really fundamental that all parties understand your tax strategy and your appetite for tax risk, and that the planning is robustly implemented so that it stands up to scrutiny and can actually deliver sustainable value through to your exit. And that's important when we think about planning, because yes, of course, there's the law and case law as it stands today. But one has to have a mind to the future, the EU reform, the OECD reform so that it's very much forward thinking.

The final piece I would say is it's not just about direct tax. Taxes like sales tax, employment taxes are some of the biggest taxes companies face, and they have a direct impact on a company’s underlying earnings and, therefore, enterprise value. So these are really important value levers in a deal.

First thing I'd say, get the tax department involved as a business partner in a transaction from an early stage. This will help them understand the value creation thesis, and then, therefore, help tax be accretive to that process. Secondly, I think if you're looking to sell a company, it's about getting prepared. Spending time, months out of a transaction, understanding your tax risks and contingencies, and implementing a mediation plan ahead of a deal. On the other side of that, is if there are upsides in spending time really bringing to life for a potential buyer the benefits of those and how they can realise them.

Thirdly, I would say it's around getting into the numbers. Tax can be incredibly complex for deal teams and impenetrable at times, and it's about bringing to life for them, what does it mean in terms of dollars, the tax risks and upsides. And that's no mean feat in a world of increasing tax complexity with pillar 2 and global minimum tax, but crucially important. As PwC's Deal Tax market leader, I want us to be our client's chosen partner, for enhancing value in deals through tax. We aim to do this by applying world class tax expertise to the bigger picture, helping our clients make successful deals happen and striving to enhance value of each investment.