The New York Times’ Dealb%k reports on an “obscure” tax strategy some private equity groups are using to pull cash out of companies well after they IPO.
Typically a private equity firm will buy a company out, fix it up, then sell to another firm or offer it publicly.
The “supercharged IPO” strategy involves “companies sign[ing] a long-term contract with the private equity owners to hand over 85 percent of their current and future tax savings. The newly public companies keep the remaining 15 percent, providing it with deductions that they otherwise would not have had,” the report explains, adding some tax experts see the strategy as “financial engineering.”
Read more here.
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