VAT Is Gift That Keeps On Giving For McCarthy Clan

“Had I stayed, I’d probably be sitting behind a desk reading a boring report, wishing I was somewhere else,” he explained in a 2002 interview.

In 1996, the couple relocated the business to Bray. There were personal reasons, and McCleary was impressed with the business supports available, especially research grants and tax credits. In 2020, Megazyme’s turnover was almost €11m and net profit was €2m. Shareholder dividends of €8m in 2019 and 2020 were easily afforded.

A year ago, Neogen paid handsomely for the Megazyme portfolio: €32.5m cash and €4m in shares at closing, €7m cash deferred, and another contingent cash payment of €2m. Ownership of the Megazyme equity was vested in British Virgin Islands entities many years ago.

McCleary (71) has retained a role with the new owners as scientific adviser, and his name continues to be added to scientific research papers published by the company. “I loved my time in Megazyme, but with advancing years and no family member able to take over the helm, sale was the only option,” he explains.

“I was approached by Neogen, and they made an offer that I could not turn down. Clearly, the financial arrangement was fair, but as importantly as this, the company will stay where it is, doing what made it successful, and there are no job losses. In fact, I believe that an additional six new positions were created in 2021.”

How times change. Seems like only yesterday that Fexco boss Brian McCarthy was complaining about the fees Dublin Airport wanted to charge him for setting up a VAT refunds booth in the departures area. Don’t be surprised if the Fexco dynasty might soon afford to buy the airport itself, thanks to son John McCarthy (pictured) selling his Taxamo VAT software company for €165m in May 2021.

That deal rapidly followed the McCarthy père offloading Goodbody Stockbrokers to AIB for €138m, c.€70m of which goes to Fexco, for its 51% share (staff own the rest). This was almost three times what it cost a decade earlier. The sale to AIB followed two hiccups, as deals to sell the broker to Chinese banks fell through.

The family fascination with VAT has paid off handsomely. Obtaining VAT refunds for tourists started the family on the road to riches, although helping companies pay VAT inspires youngest son John’s enterprise. He was an early convert to the notion that the digital economy is increasingly becoming the economy itself. McCarthy set up Taxamo in 2011 and developed a sales ledger app for calculating (and paying) rates of VAT applicable for sales within the EU.

The business really grew legs when Brussels declared VAT was to be paid at the rate applicable in the country of delivery, rather than the cheapest available (usually Luxembourg), through which the Amazons of this world filtered their sales. Bewildered accountants in the US and elsewhere clamoured for Taxamo’s plug-in to guide increasingly complex transactions with EU customers, and McCarthy quickly tweaked the app for non-EU use. His crowning moment was striking a deal with Deloitte for its new digital tax compliance service. After years of losses, the company booked a net profit of €1.5m in 2020, although buyer Vertex paid over the odds for the technology, not the balance sheet.

Vertex, located in King of Prussia, in Pennsylvania, is a major US tax compliance specialist. ‘Tax solutions for companies built on bricks, clicks or a mix – making tax a seamless part of global commerce,’ reads its promotional boast.

John McCarthy (41) held a 37% stake in Evat Solutions Ltd, the Taxamo operating company, while brother Denis McCarthy (43) owned 22% of shares. Fexco Unlimited Company also did very well from the takeover, thanks to its 29% share-holding.

‘Dividends of €8m in 2019 and 2020 were easily afforded’