Houlihan Lokey Case Study: Portco Separation Planning

When multiples compress, portfolio companies that are likely to sell a carve-out division should consider preemptive tax planning to drive enhanced returns.

Despite best efforts, from time to time, sponsor portfolio companies evolve into business enterprises in which the value of the sum of the parts is greater than the whole. This typically occurs when (i) strategic initiatives shift during ownership, (ii) technology evolves quicker than anticipated, or (iii) add-on acquisitions are not integrated successfully. In these situations, exiting the portfolio company in pieces should yield higher returns.

This article will consider the tax implications of:

  1. Selling and distributing assets from a corporation,
  2. The potential upside to tax planning in a low valuation environment, and
  3. Key considerations on legally separating business divisions for tax purposes ahead of a future exit.

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Contacts

Lance Carr Managing Director
+1 212.497.4187 Bio & Contact
Lance Carr
Tom Goldrick Managing Director Head of M&A Tax Services 
+1 312.456.4787 Bio & Contact
Tom Goldrick
Eric Jourdan Managing Director
+1 312.995.7769 Bio & Contact
Eric Jourdan