Japan Due Diligence, Valuation, & Deal Integration Services: Overview
JTAX can assist clients with due diligence, valuation, and deal integration services in Japan.
JTAX’s services can be provided separately or as part of an integrated package. We able to work with a client’s existing advisors and can also provide introductions to other specialists (law firms, actuaries, etc.) as required.
Key components of our Japan Due Diligence, Valuation, and Deal Integration Services include:
- 1Due Diligence: Due diligence in Japan is often conducted under considerable time pressure. JTAX can interview local management to obtain a better understanding of the local business and also review accounts and tax filings to ensure that the local entity is in compliance. The goal is to minimize the risk of hidden negatives being revealed after an acquisition has occurred.
- 2Valuation: In addition to valuations undertaken for commercial purposes, JTAX is able to assist clients with valuations for statutory, legal, and accounting purposes.
- 3Deal Integration: Once a Japan merger or acquisition has been completed, critical functions need to be standardized in order to avoid interruption to the business and maximize value. Key focus areas include payroll, benefits, HR, tax, and accounting functions.
Please Contact Us for more information about our Japan Due Diligence, Valuation, and Deal Integration Services.
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Japan Due Diligence, Valuation, & Integration Services - FAQ
JTAX’s due diligence services are designed to provide peace of mind to clients purchasing companies or other assets in Japan.
Deals by foreign buyers in Japan are driven by a value proposition. Prior to closing it is vital to identify any factors that may adversely impact that assessment. JTAX’s due diligence services enhance our clients’ understanding of the target and increase the likelihood that the transaction will meet its objectives.
Our typical due diligence activities include:
a. As a first step, working with our clients to determine a realistic scope for the proposed due diligence given the inevitable time and cost constraints.
b. Interviewing Japanese management to gain an understanding of the overall environment surrounding the acquisition target.
c. Reviewing past years’ statutory financial statements.
d. Reviewing past years’ tax compliance including corporate income tax returns and Japanese Consumption Tax (i.e., VAT) returns.
e. Identifying any unresolved tax audit issues and assessing the possible (negative)impact on value.
f. Checking labor issues such as company pension plans, work rules, and social insurance / labor insurance.
g. Interviewing the company’s external professionals (including accountants, tax advisors, and legal counsel) to identify additional issues that should be brought to the attention of the purchaser.
JTAX’s valuation services are designed to help clients understand the value of assets in Japan and thereby provide a basis for a transaction moving forward
Common purposes for which clients utilize JTAX’s Japan valuation services include:
a. For commercial reasons as part of an asset purchase or corporate acquisition.
b. In support of litigation including where there is a requirement to value the litigation claim itself.
c. Determining fair values for accounting purposes.
d. Purchase price allocation.
e. To satisfy other statutory requirements.
Our Japan valuation services will help you make decisions with confidence, enhance your results, and help you get ahead of key issues.
JTAX’s Japan Deal Integration Services are designed to help clients realize value in recently purchased companies or other assets in Japan.
JTAX takes a practical approach to deal integration. We start by getting the basics of the new organization under control as quickly as possible. Free of these fundamental concerns, management is then free to focus on achieving the value proposition that formed the basis of the acquisition.
Next, JTAX works to enhance aspects of the new business, particularly in the areas of financial reporting, tax and HR.
JTAX’s key deal integration activities include:
a. Interviews with local management: Input from local management ensures that concerns of local management are understood and that important issues are not missed.
b. Entity: An important consideration will be whether to continue the business in the current entity or establish a new entity and transfer the business. For example, a US purchaser may wish to utilize a Godo Kaisha (“GK”) which can be a pass-though / disregarded entity for US tax purposes.
Internal control can be strengthened by way of utilizing an independent Japan Nominee Director.
c. Finance: Our goal is to get basic reporting in place as quickly as possible. Japanese companies often use old, proprietary accounting systems that are in Japanese only. In the short term, reporting can be exported to Excel, translated, and matched to the parent company’s systems. Thereafter, a longer term solution needs to be considered including possibly outsourcing the finance function. The goal is to ensure that foreign management receive adequate and timely reporting from Day 1.
d. Tax: We work to ensure that critical tax compliance activities continue and that foreign management receive adequate information about local Japanese requirements. This can be particularly important in situations where the Japan entity becomes a pass-through for foreign tax purposes. Appropriate inter-company agreements need to be put in place to reflect the Japan entity’s changed circumstances.
e. HR: Appropriate handing of HR issues is key to a successful deal integration. Foreign management needs to understand the basics of local Japanese employees’ concerns – payroll, social insurance, labor insurance, etc. If the acquisition has (statutory) work rules, a review needs to be done to ensure they are up to date and contain no hidden surprises (for example provisions related to unfunded retirement payments.) The integration of performance management and appraisal systems needs to be dealt with.