Unlocking Growth: Navigating the Path to a US Flip

At KPMG we want to empower growth companies to reach new heights. In this article, we delve into the world of US flips - an exciting opportunity for companies seeking growth, expansion, and access to global capital markets. KPMG recently assisted a Finnish company in a successful US flip. Through extensive experience in cross boarder arrangements, we have vast knowledge in do’s and don’ts of such multidimensional reorganizations. 

In short, a US flip is a reorganization in which a US company, usually a Delaware corporation, is established and becomes the holding company of your Finnish company. From the shareholders’ perspective this means that, after the completion of the US flip, they own shares in the US parent company in the same proportion as they owned the Finnish company before the flip, and the Finnish company is a wholly owned subsidiary of the US company.

Until recently the question of how to execute a US flip without considerable tax consequences was somewhat of an eternal problem.

In the fall of 2023, the Supreme Administrative Court of Finland gave two rulings of US flips. In one of them (ruling 2023:74) the court ruled it is not possible to execute a US flip tax neutrally through an exchange of shares.

In the other ruling (ruling 2023:75), a process which was argued by KPMG as the company’s legal representative, the court on the other hand confirmed the tax neutrality of a US flip arrangement through a merger without consideration. In this process a new Finnish limited liability company is established by a US parent company, and the existing Finnish company mergers into the newco. In this ruling, we also received confirmation on the application of the principle of continuity to possible future transfer of the US company shares by Finnish shareholders.  

The decision to pursue a US flip is a pivotal one for any company. It can offer a pathway to access to capital, as some US investors prefer not to invest in non-US companies. One of the most common reasons for companies to pursue a US flip is to gain access to the US capital ecosystem, thereby opening up investment opportunities for US investors that are mandated or prefer to invest in US entities only.

In addition to the financing considerations, a US flip can be a strategic decision for companies with an overall focus on the US market seeking to unlock value and position themselves for long-term growth and success in the US and global market.

It is essential for companies to carefully evaluate the potential benefits and considerations associated with such a move.

A common question is when to do the flip. Is it better to do it earlier on or to wait? As a rule of thumb, one could say that from a legal perspective it is usually less complicated the earlier on it is done. However, as mentioned, the choice whether to pursue a flip or not depends on so many other considerations than legal and tax aspects. With the new possibilities the Supreme Administrative Court ruling provides, the question of timing is less relevant from a tax perspective, at least when a company has shareholders taxed in Finland. If a US flip, or a flip anywhere else for that matter, could be a valid path for your company, there are choices you can make and legal tools to incorporate from the get-go to facilitate easier flip arrangements in the future. We like to call this concept Born Global.

Embarking on a US flip journey can be a great opportunity for growth companies seeking to unlock their full potential and drive growth in the global marketplace. However, in summary, the wise words of Benjamin Franklin hold true: If you fail to plan, you plan to fail. Or less dramatic: thorough planning can provide for a much smoother process without unpleasant surprises.

There are numerous aspects to a US flip to consider and understand. By carefully considering the various factors playing in, you can make informed decisions about pursuing the flip. Contact us to learn more about how we can support your company's US flip ambitions.