Rulings on Deductibility of Acquisition Costs and Management Fees

By: Arne Møllin Ottosen, Michael Nørremark

The Danish market for merger and acquisition (M&A) transactions has witnessed a high level of activity in recent years. One of the driving forces has been private equity funds, which have been involved in the take-over of several high-profile Danish companies, the largest so far – and reported to be largest leveraged buy out in Europe ever - being the takeover of a majority of the shares in the listed Danish telecom TDC A/S by a consortium of five private equity funds. As the costs related to an M&A transaction can be quite significant, the tax treatment of acquisition costs is often a significant element in an M&A transaction. Furthermore, as management fees including various forms of incentive schemes seem to be a customary part of almost every M&A transaction, the tax treatment of the such fees is also a significant consideration in M&A transactions.

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