Navigating the most complicated risks.

Contingent Digital Producers Contingent Digital Producers

Overcoming Cross-Border Tax Uncertainty: Facilitating a Strategic Investment

Castle Harbour was engaged to navigate a complex international tax dispute in the context of a private equity investment.

Castle Harbour was engaged to navigate a complex international tax dispute in the context of a private equity investment.

A global infrastructure fund was acquiring a significant minority stake in a U.S. company with operations in Mexico. During the deal, a pending challenge by the Mexican tax authority came to light: the authority claimed that the company’s Mexican subsidiary owed substantial withholding taxes on intra-group technical service fees paid to the U.S. parent, despite a tax treaty that exempted those payments. The potential exposure – including back taxes, denied deductions, and penalties spanning multiple years – posed a serious concern for the investor. Leveraging its cross-border tax expertise, Castle Harbour worked with the client’s advisors to turn this contentious issue into an insurable risk. The team emphasized the robust defenses available (including favorable rulings the company had already obtained from Mexican authorities) and tapped into underwriters experienced in treaty-based tax matters. Castle Harbour negotiated a tax insurance policy to cover the disputed liability, ensuring that if the Mexican tax claim were ultimately upheld, the financial impact would fall on the insurer. This innovative solution gave the investor the certainty to proceed with the transaction, knowing that a challenging foreign tax issue had been effectively neutralized.

Policy type: Tax Insurance (Contingent Tax Risk)
Size: $500MM - $1B
Sector: Infrastructure / Logistics

Buyer type: Financial Sponsor
Buyer jurisdiction: U.S.
Seller jurisdiction: U.S.

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Tax Digital Producers Tax Digital Producers

Preserving a Key Tax Election in an M&A Transaction

Castle Harbour was engaged by a financial sponsor to address a latent tax risk related to a previous acquisition structured under Section 338(h)(10) of the tax code.

Castle Harbour was engaged by a financial sponsor to address a latent tax risk related to a previous acquisition structured under Section 338(h)(10) of the tax code.

In the earlier deal, the buyer had elected to treat a stock purchase as an asset acquisition for tax purposes – a valuable election that provides a stepped-up asset basis – but some of the target’s shareholders rolled a portion of their equity into the new company. This partial equity rollover introduced uncertainty about whether the 338(h)(10) election was technically valid. Drawing on its transactional tax expertise, Castle Harbour helped the client mitigate this risk. The team distilled the issue (the potential failure of the tax election due to the rollover) into a clearly defined insured event and approached the insurance market with a comprehensive analysis from tax counsel. Castle Harbour successfully obtained a tax insurance policy that would protect the client if the IRS ever invalidated the election. This coverage preserved the expected tax benefits of the deal and shielded the client from a significant tax cost that would have arisen if the step-up were lost.

Policy type: Tax Insurance (Buyer-Side)
Size: $100MM – $250MM
Sector: Transportation Services

Buyer type: Financial Sponsor
Buyer jurisdiction: U.S.
Seller jurisdiction: U.S.

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Tax Digital Producers Tax Digital Producers

Safeguarding a Tax-Free Spin-Off: Averting a Billion-Dollar Tax Exposure

A corporate client was undertaking a complex spin-off reorganization ahead of a major acquisition.

A corporate client was undertaking a complex spin-off reorganization ahead of a major acquisition.

The transaction was structured to qualify as a tax-free non-taxable spin-off, but if it failed to meet stringent tax requirements, it could have resulted in nearly $1 billion in combined taxes for the parties involved. Leveraging its deep tax and insurance expertise, Castle Harbour articulated the risk to underwriters and negotiated an innovative insurance solution. The team secured coverage for the client’s portion of the potential tax hit – hundreds of millions of dollars – at favorable terms. This approach mitigated the existential tax risk and gave the client the confidence to proceed, knowing that if the spin-off’s tax-free status were ever successfully challenged, the resulting liability would be covered.

Policy type: Tax Insurance (Contingent Tax Risk)
Size: $1B+
Sector: Hospitality

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Tax Digital Producers Tax Digital Producers

From Red Flag to Resolution: Insuring a Critical Tax Risk

During a high-paced multi-billion dollar M&A process - a material tax issue threatened to derail the deal: the A target’s valuable S-corporation status was at risk of being retroactively invalidated, which could trigger significant unforeseen tax liabilities.

During a high-paced multi-billion dollar M&A process - a material tax issue threatened to derail the deal: the A target’s valuable S-corporation status was at risk of being retroactively invalidated, which could trigger significant unforeseen tax liabilities.

The team quickly identified the exposure during diligence and mobilized its internal tax specialists to assess the severity of the issue and structure a clear narrative for underwriters. Through close coordination with deal counsel, advisors, and insurance markets, we secured an insurance solution covering the identified S-corp qualification risk. By converting a potential deal-breaker into an insurable exposure, the brokers preserved full deal momentum and provided the buyer with critical protection and peace of mind.

Policy type: Tax Insurance (Buyer-Side)
Size: $500MM – $1B
Sector: Logistics

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RWI Digital Producers RWI Digital Producers

Strategic Advocacy: Overcoming Compliance Risks in a High-Stakes Acquisition

Castle Harbour helped a U.S. healthcare buyer secure broad RWI coverage in the face of a complex regulatory compliance issue involving a European medical device target.

Castle Harbour helped a U.S. healthcare buyer secure broad RWI coverage in the face of a complex regulatory compliance issue involving a European medical device target.

Castle Harbour was engaged by a U.S.-based healthcare company pursuing the acquisition of a European medical device manufacturer with operations across Switzerland and Germany. A major diligence hurdle emerged when the target disclosed an unresolved regulatory compliance issue related to clinical trial documentation—a risk that threatened to trigger future product liability claims and regulatory sanctions.

Recognizing the sensitivity and complexity of the exposure, Castle Harbour worked hand-in-hand with the client’s regulatory counsel to frame the issue appropriately for the insurance markets. By carefully isolating the nature of the exposure and demonstrating proactive remediation efforts by the target, Castle Harbour successfully negotiated extremely limited, rather than broad, exclusions with the RWI underwriters.  The result: the buyer obtained comprehensive policy coverage for the balance of the target’s operations, mitigating the most critical regulatory risk and maintaining full acquisition momentum despite late-stage diligence concerns.

Policy type: Buyer-side RWI
Size: $250MM - $500MM
Sector: Healthcare / Life Sciences

Buyer type: Strategic / Corporate
Buyer jurisdiction: U.S.
Seller jurisdiction: Switzerland

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The case studies presented are illustrative in nature and are intended solely for informational purposes. They may include experiences of Castle Harbour brokers while employed at other firms. Certain details have been modified or omitted to preserve client confidentiality and comply with applicable legal and regulatory obligations. These examples do not represent specific recommendations or guarantees of future outcomes.