Mergers & Acquisitions Presenter: Mindy Mayo mindy.mayo@ryan.com

Mergers, Acquisitions, and Reorganizations Agenda Asset Deal Stock Deal “F” Reorganization Statutory Merger 338(h)(10)

Mergers, Acquisitions, and Reorganizations Asset Deal Buyer purchases the assets of a target company (partial or total) Typically, the acquired employees will be immediately reported on the purchaser’s payroll In the case of partial acquisitions, the target company continues to survive and report payroll For both partial and total acquisitions there is generally a movement of employees and related assets

Mergers, Acquisitions, and Reorganizations Asset Deal – Considerations Federal “Successor” qualification Carryover of YTD taxable wage bases Tax deposit compliance/reconciliation Payroll Systems Integration Forms W-2 reporting (standard vs alternative) Forms W-4 Forms 1099 Year-end notifications to IRS

Mergers, Acquisitions, and Reorganizations Asset Deal – Considerations State “Successor” qualification Carryover of YTD taxable wage bases SUI experience transfers (optional or mandatory) Payroll Systems Integration State Employee Withholding Allowance Certificate State correspondence/notification Account closures

Mergers, Acquisitions, and Reorganizations Stock Deal Buyer purchases the stock of a target company Typically, the acquired company remains “alive” and all employees will continue to be reported under the target company’s payroll id numbers Generally no change in target company’s business Generally no initial movement of employees from target company payroll to purchaser’s payroll

Mergers, Acquisitions, and Reorganizations Stock Deal – Considerations Federal and State There are generally no tax considerations in stock deals as the employees of the acquired company will continue to be reported under the acquired company’s federal/state ID numbers. No Forms W-2, W-4, and 1099 issues No SUI transfer of experience issues Potential Payroll Systems Integration Subsequent movement of employees

Mergers, Acquisitions, and Reorganizations “F” Reorganization Typically involved when a corporation changes its name, the state where it does business, or makes changes to its corporate bylaws/charter Does not change the federal identification numbers of the entity Some states require a new SUI number No movement of employees No movement of assets

Mergers, Acquisitions, and Reorganizations “F” Reorganization – Considerations Federal and State There are generally no employment tax considerations associated with a Type F reorganization Forms W-2, W-4, and 1099 should reflect new entity name (if entity name change involved)

Mergers, Acquisitions, and Reorganizations Statutory Merger Also known as a Type A merger. It is a merger between two entities that is effected under the laws of the U.S., a state or territory or the District of Columbia. Statutes of foreign jurisdictions will also qualify as long as the statute operates in a similar manner to a domestic merger statute. Post merger, one company continues to exist while other ceases to exist Movement of employees and assets

Mergers, Acquisitions, and Reorganizations Statutory Merger – Considerations Federal “Successor” qualification Carryover of YTD taxable wage bases Tax deposit compliance/reconciliation Payroll Systems Integration Successor must file one Forms W-2 for entire year Forms W-4 Successor must file one Forms 1099 for entire year Year-end notifications to IRS

Mergers, Acquisitions, and Reorganizations Statutory Merger – Considerations State “Successor” qualification Carryover of YTD taxable wage bases SUI experience transfers (optional or mandatory) Payroll Systems Integration State Employee Withholding Allowance Certificate State correspondence/notification Account closures

Mergers, Acquisitions, and Reorganizations 338(h)(10) election Jointly made election between purchaser and target company of a stock purchase The stock purchase is ignored for corporate tax purposes The target company is generally treated as having made a deemed sale of its assets and then liquidated

Mergers, Acquisitions, and Reorganizations IRC 338(h)(10) – Considerations Federal/State Generally same considerations as that of an asset acquisition. SUI regulations/rules should be consulted as some states will consider the transaction a stock transaction.

Mergers, Acquisitions, and Reorganizations General considerations Are employees AND assets involved Related party transactions In some states, the employees are enough to establish common ownership/management Working with 3rd party payroll processors Potential Forms 1099-B requirements Local Tax compliance Forms W-4 Compliance

Mergers, Acquisitions, and Reorganizations General considerations Tax, Legal, Payroll, HR alignment Due Diligence Team to work through coordination of efforts Workplan Responsibility

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