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Tax Receivable Agreement Private Equity

It examines TSMs in the broad landscape of financial transactions and shows that the way TRAs are used in the public market differs from similar private transactions in a way that is likely to be detrimental to public shareholders. This article also shows how Up-C, a type of IPO transaction that most often uses TRAs, allows owners before the IPO to take money that should be planned for public shareholders in an undisclosed way, and offers remedies to this problem. Private equity firms began to become tech-conscious in 2007, following the Blackstone Group`s $3.7 billion I.P.O. Prior to the offer, the private equity firm used complex partnership structures to establish large deductions for goodwill, a kind of intangible asset. Blackstone`s partners then had to keep 85 percent of the deductions, or $864 million, as shown in securities statements. A form of strategy known as a tax-sharing agreement has been around for decades. Through these transactions, a parent company and its subsidiary agree to share all losses that may reduce their tax bills. TRA is just another form of basic investment idea. No matter how skilled private equity investors and their advisors are, people who spend their whole lives figing out how to deceive people will earn most of the time. In the worst case, they get caught and have to give up some of the money they wanted to take. The problem of S Corporation is only relevant when a founder sells a company during an IPO.

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