Buying a company as a Share Deal: Debt push down

In the context of a share deal, a large part of the acquisition costs is usually financed by borrowing. Via the structuring variant “Debt push down” in the sense of combining the interest expenses of the acquirer with the operating results of the target company, the repayment of the loan can be accelerated. 

In this situation, the company to be acquired virtually buys itself

In order to ultimately tax-optimized acquisition, a number of other aspects need to be considered in addition to deductible acquisition financing.

There are various structuring options:

On the one hand, a fiscal unity for income tax purposes can be established. This does not actually result in a “push down” of the liabilities. Nevertheless, at the level of the acquiring company, the interest expense can be offset against the income to be transferred from the tax group to the controlled company within the framework of the general regulations (possibly taking into account the interest barrier) and the company thus pays off its purchase price itself.

Another option is to carry out a merger of the GmbH with the acquired company. This results in the GmbH assuming the liability for the acquisition itself and paying it off accordingly. The interest expenses are offset directly against the profits. In this case, the general regulations of the transformation tax law (and possible unfavorable tax consequences) must be observed.

As a further option, the desired debt push down can also be achieved by a distribution of dividends for which a loan is taken out. For this purpose, there must be a sufficient taxable contribution account and no distributable profit, as otherwise capital gains tax may be due.

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