Four tax considerations for private equity firms making acquisitions
Private equity firms are on a buying spree as they seek to accelerate portfolio company growth amid a relatively slow-growing economy.
However, correctly evaluating the tax situation at the target company can be the difference between popping the champagne cork and being left with a headache that lasts for years.
This is particularly true given the impacts of tax reform. In the case of a pure asset acquisition, the opportunity to immediately deduct tangible personal property could really affect how purchase-price allocations are structured. And given the steep drop in tax rates for C corporations from 35 percent to 21 percent for years beginning in 2018, the choice between using a pass-through entity — an LLC, usually, or a C corporation — is more complex than it has been in the past.