Credits and Incentives: A Guide for Private Equity Companies
Private equity companies may benefit from tax credits and incentives when engaging in mergers and acquisitions.
Private equity companies should explore tax credits and incentives throughout their business lifecycle. Credits and incentives benefits often equate to 15-30% of investments. Two critical times to consider credits and incentives are before closing a transaction and after the merger.
Explore the opportunities and considerations for private equity groups regarding tax credits and incentives. This may help improve investment returns and the company’s overall financial performance.
Credit considerations prior to closing transaction
Prior to closing, private equity companies should review their target’s existing tax credit and incentive agreements. The types of credits and incentives a target company is enrolled in and the private equity firm’s plans will affect whether to continue, abandon, or renegotiate any existing agreements. This can help verify the company is not leaving money on the table or placing future potential benefits at risk.
Credit considerations post-transaction
After a merger, acquisition, or significant equity investment, there may be opportunities for private equity companies to take advantage of tax credits and incentives. If there are plans for capital investment, employment growth, or job training, the company may be eligible for tax credits and incentive opportunities. If there is planned facility consolidation, there may be tax credit and incentives available to support those activities. Before undertaking any activities, be sure to first identify and capture potential credit and incentive opportunities.
How we can help
CLA works to help clients take advantage of available tax benefits, increase investment returns, and improve the overall financial performance of targets and portfolio companies. Contact us today to learn more about how we can help you.
Written by Patrick Hanlon
Craig Arends is a principal at CLA and is the managing principal of CLA's private equity practice. Craig brings a concentration of experience in providing accounting and transaction structuring advice for leveraged recapitalizations, purchase accounting and SEC reporting, assessing quality of earnings, and GAAP accounting. He has far-reaching experience with critiquing financial models and reviewing target companies' financial performance to identify cost reductions and/or operating efficiencies Craig has more than 30 years of experience in public accounting serving public companies, private equity groups, and companies, including a term as principal in charge of a Big Four Capital Markets Group in Moscow, Russia. He has led financial accounting due diligence projects for private equity investor groups and venture capital funds, primarily in the technology, communications, and manufacturing industries, as well as assisting with Foreign Corrupt Practice Act matters ranging from investigation of payments made, validation of compliance with corporate policies, and review of proposed transactions to ensure compliance. When not working, Craig enjoys watching any sports, but his most favorite are baseball, football and soccer.
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