International group simplification

Issue

The international expansion of our client by means of its buy & build strategy, had resulted in a complex group structure which was no longer adapted to the current market environment and neither optimal from an operational and tax perspective.

In the wake of the cost enhancement programme, the client asked PwC to perform a group simplification exercise.

Approach

In order to achieve a group structure which is consistent, operationally efficient, tax-robust and tailored to the characteristics of their service market, we proposed the following approach:

1. Mapping on country-by-country basis of the existing operations and legal structure
2. Analysis of the overall group structure
3. Review of the operational model + recommendation of ideal operational model
4. Suggestion of ideal legal group structure, overall and on a country-by-country basis
5. Cost/benefit analysis of the newly aligned group structure
6. Step plan for implementation and possible timeline
7. Roll-out of the restructuring

Recommendation

We recommended to reduce the number of entities with 15 worldwide, and which was based on the following basic principles:

1. Alignment of the legal structure to the operational structure
2. Limitation of the number of entities in the same country
3. Avoidance of intermediary holding companies
4. Optimal cost/benefit balance
5. Efficient exit possibilities
6. Tax-optimal and robust

Results

The simplified group structure resulted in the following benefits:

• Reduction of the compliance cost (e.g. annual accounts, tax returns, legal documents), which would be a recurring benefit
•  Operational benefits (e.g. reduction of work force)
•  Transparent group structure, which would be a good starting point for future acquisitions