# Financial restructuring and benefit transfer risks in Corporate mergers and Acquisitions There are indeed risky behaviors of improper benefit transfer and tax avoidance through financial restructuring and valuation adjustments in corporate mergers and acquisitions. These practices are usually in the gray area of law and ethics. The following are related common methods and risk points： ## Common financial restructuring methods 1. **Asset overvaluation or undervaluation**: Deliberately overvalue the acquired party's assets or undervalue the acquired party's assets through unreasonable evaluation methods 2. **Debt restructuring and transfer**: Transfer high-interest debts to entities with higher tax burdens, and low-interest loans remain in tax-advantaged entities 3. **Capital structure adjustment**: Create a tax shield effect by changing the ratio of equity to debt 4. **Book value manipulation**: Make accounting adjustments before mergers and acquisitions, such as changing depreciation methods or delaying the confirmation of expenses ##Common methods of valuation adjustment 1. **Manipulation of evaluation parameters**: Selective use of evaluation parameters and methods to achieve expected valuation results 2. **Related-party transaction pricing**: Change the actual value of the acquired company through related-party transactions 3. **Adjustment of goodwill and intangible assets**: Overallocation of M&A prices to goodwill or specific intangible assets to obtain tax advantages 4. **Contingent consideration arrangements**: Design complex follow-up payment terms, postpone tax payment or transfer benefits ## Regulatory agencies focus on Regulatory authorities usually review the following anomalies： -Transaction pricing deviates significantly from the fair value of the market - Impairment or disposal of large assets in the short term after the merger -The tax structure has undergone major changes before and after the merger and acquisition -There is an undisclosed relationship between the two parties to the merger and acquisition It should be emphasized that these improper actions may lead to serious legal consequences, including tax penalties, regulatory investigations and shareholder lawsuits. Compliance mergers and acquisitions should follow the principle of fair trade and achieve business goals through legal means.