Title page for ETD etd-03232010-135418

Document Type Master's Dissertation
Author Kweza, Philip
URN etd-03232010-135418
Document Title The impact of indirect taxes and the Income Tax Act on corporate valuation in mergers and aquisitions
Degree MBA
Department Gordon Institute of Business Science
Advisor Name Title
Prof M Ward Supervisor
  • tax
Date 2008-04-01
Availability unrestricted

When mergers and acquisitions are conducted, valuation plays an important role in establishing a fair market value (FMV) of a target company. A number of variables including direct taxes are considered during the valuation process. This study looks at the impact of indirect taxes on the valuation result of target companies involved in mergers and acquisitions.

Target companies considered for this study were those from different industries that were involved in mergers and acquisition transactions in 2004/2005 period, had at least three years of financial information available and had paid capital gains tax (CGT), an indirect tax, following a successful conclusion of the transaction.

Research showed that there is likelihood that valuation result of target companies involved in mergers and acquisitions is significantly different when valuation included CGT compared to when valuation excluded CGT. Furthermore, considerable savings, implying higher ROI, could be realized should corporate acquirers and private equity factored in the effect of indirect taxes on FMV of target companies especially in industries where there are considerable under-valued operating assets. Effective tax rates can be determined for different industry groups and they can be mathematically be modelled with fair accuracy.

2007 University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria

Please cite as follows:

Kweza, P 2007, The impact of indirect taxes and the income tax Act on corporate valuation in mergers of acquisitions, MBA dissertation, University of Pretoria, Pretoria, viewed yymmdd < http://upetd.up.ac.za/thesis/available/etd-03232010-135418/ >


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