Short-term double or quits on M&A and taxation

Short-term double or quits on M&A and taxation

While in Europe markets are shrinking due to the Brexit, in the Middle East a new super-bank is being created which will start to operate in early 2017.

Brexit, the European banks crisis (with Italy and Portugal just about to be rescued), the emerging economies’ lower growth and international markets’ instability are affecting the financial sector, and the M&A could not be less important.

In Spain, this sector has fallen 35% during the first semester of 2016, especially in the real estate field which has suffered a 67.5% meltdown. Everything is not bad though and we have witnessed in the same period a great upturn in the financial sector, that has increased its operations more than 12%, according to specialised media Bolsamanía’s information.

Meanwhile, in the Middle East, a deal has just been closed in the United Arab Emirates (UAE) by which the country’s second and third main banks are going to merge in order to form a super-bank assessed in E175.000 millions. The Abu Dabi’s National Bank and First Gulf Bank’s joint will become the greatest Middle East and Northern Africa’s bank in a soon-to-be-completed -early 2017- operation.

In any case, while the Middle East they are looking to the future, Europe is still in a ‘reactive mood’. Thus, the European Union is reacting now to the ‘Panama Papers’ scandal announcing a campaign against tax loopholes in order to avoid fraud, as stated by the British newspaper The Guardian. In this regard, fiscal authorities will be empowered to identify off-shore funds’ owners and, besides, a new law will be drafted to hamper lawyers and fiscal advisors to help their clients ‘to stash money’ in tax havens. This new measure will force businesses to disclose not only their revenues but also their tax bills.

In addition, Brexit has disrupted the main European stock exchanges. It is not going to be an easy summer, rightly pointed out Spanish economic newspaper, Cinco Días. Uncertainty faced by most-exposed to the British market businesses is affecting their stock prices and income statements.

To put in other words: and income and trading activity drop was expected although its real effect cannot be known in detail until, in the following weeks, businesses release their company results and their profits per shares are analysed. However, from Brexit, and from a more public point of view, we have already witnessed Spanish banks such as Santander or Sabadell crashing, with a loss of 17% and 20% respectively.

If you have any legal doubt on how to proceed when facing a company merging or acquisition, or how to optimise your assets from a tax point of view, please do not hesitate to contact us for a complimentary review at clerk@delcantochambers.com

Del Canto Chambers’ Editorial Board

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