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