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Private equity versus mezzanine: tax structuring cross-border investments
26/07/2006. Source:Practical Law Company, Marc van Campen and Dennis van den Broek, Baker & McKenzie.
 Cross-border private equity investments contain a variety of tax elements that complicate the structuring of those transactions. They also offer several opportunities to optimise the investors' and target's tax position after acquisition.
Mezzanine investments, which offer a mixture of debt and equity, can provide the returns of a traditional private equity fund, while presenting a lower risk profile. However, they also present particularly complex tax planning issues when attempting to maximise the after-tax return. In relation to tax planning issues, US tax aspects are frequently considered because of the importance of US investors for the private equity industry.
Against that background, this chapter examines a number of advantages and disadvantages of the private equity or mezzanine investments, concentrating on their basic features, specific tax issues and considering examples of particular tax structures that are employed.
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