Companies that overlook state and local business tax issues when making foreign acquisitions run the risk of derailing the entire mergers and acquisitions process, warns US accountancy firm CliftonLarsonAllen.

US state and local taxes are the biggest tax issues likely to threaten the foreign acquisition of a US company.

“If a target company has not met its state and local tax requirements, this will have a significant impact on its earnings and balance sheet,” said Craig Arends, partner at CliftonLarsonAllen, which is part of Nexia International, a global network of accountancy and consultancy firms.

“The buyer may decide it paid too much for the target or the return on investment may be less than expected, especially if the buyer is also saddled with the tax liability,” said Mr Arends.