Andrew Hayashi

Understanding Tax Provisions in M&A Agreements

PUBLISHER
JOTWELL
DATE
2018-05-9
 

Abstract

In Private Benefits in Public Offerings, Prof. Shobe describes the emergence and evolution of a fascinating term in initial public offerings: tax receivable agreements (TRAs). These agreements reserve for the pre-IPO owners of the business the economic value of certain tax attributes that are either created in the course of the IPO or which were created over a course of years before the IPO. TRAs are contracts between the post-IPO corporation and the pre-IPO owners, pursuant to which the corporation makes distributions to those pre-IPO owners as tax assets are used. In one variation, pre-IPO owners receive the economic benefit of basis step ups that arise in certain “turbocharged” IPOs, and in other variations the pre-IPO owners receive the economic benefit of net operating losses and historical basis in the corporation’s assets.

Citation

Andrew Hayashi, Understanding Tax Provisions in M&A Agreements (reviewing Gladriel Shobe, Private Benefits in Public Offerings: Tax Receivable Agreements in IPOs (71 Vand. L. R. 888-935 [2018])) JOTWELL (2018).
 

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