Successful businesses are inclined to grow, for example by acquiring other businesses. Each
acquisition not only increases the number of entities, but also the complexity and costs of the
structure. From a commercial perspective, it is usually preferable if only one or a limited number of
entities serve the market in a country. Limiting the number of group entities is also advisable from a
financial, risk management, tax and legal perspective.

Furthermore, optimizing the group structure by significantly reducing the number of entities can
result in substantial cost savings. The average annual costs of maintaining an entity can easily
amount to EUR 20,000. This involves not only the annual ‘cash out’ costs for all sorts of mandatory
reports (financial statements, tax returns, transfer pricing documentation etc.), and licenses and
registrations, but also the ‘internal’ costs for IT system connections, maintaining accounts and, last
but not least, management time.

Getting rid of superfluous entities by way of a Legal Entity Rationalization (LER) project is essential if a company wants to keep its financial affairs manageable and an LER project also ensures substantial savings of the annual (!) costs of maintaining superfluous entitities.

Advantages of LER

  • Presenting one face to the market
  • Reducing the number of intercompany transactions
  • Simplifying and speeding up the internal and external reporting processes
  • Improving transparency
  • Reducing annual costs

KPMG LINK Legal Entity Manager

KPMG has developed a program that can be used in an LER project: KPMG LINK Legal Entity
Manager. This program presents a clear picture of your business structure, taking account of the
relevant features of each entity (e.g. turnover, profit, number of employees, intellectual property,
real estate, external financing, NOLs, etc.). This is important if a structured analysis is to be made of the entities that are to ‘remain’ and the entities that can be eliminated. The LER specialists at Meijburg & Co would be pleased to assist you in identifying these entities.

LER projects are often multidisciplinary, since the elimination of an entity can lead to the transfer of
employees, activities and financial flows and changes to IT systems. That is why we work together
with other disciplines within KPMG in the Netherlands and abroad. Thanks to our worldwide network
and our experience with LER projects, we can engage the expertise of LER specialists in numerous
countries.

Contact

Our extensive knowledge of and experience with Legal Entity Rationalization means we are well
placed to assist you in optimizing your structure. If you have any questions about this site or the LER factsheet and wish to receive further information, please contact your advisor at Meijburg & Co.