You’re Planning to Sell Your Company and You Want a Tax Break – Here it is, Opportunity Zones
A Qualified Opportunity Fund (“QOF”) is a new investment vehicle created as part of the Tax Cuts and Jobs Act of 2017 to incentivize investment in targeted communities called Opportunity Zones. Opportunity Zones are census tracts designated by state and federal governments targeted for economic development.
Qualified Opportunity Funds allow investors to defer federal taxes on any recent capital gains until December 31, 2026, reduce that tax payment by up to 15%, and pay as little as zero taxes on potential profits from a Qualified Opportunity Fund if the investment is held for 10 years.
A QOF is any investment vehicle organized as a partnership or corporation that holds 90 percent or more of its assets in qualified opportunity zone property.
What types of M&A deals are getting financed today?
It seems like all deals are getting financed in this current market. Healthy deals involving good companies that generate consistent cash flow get financed in all market cycles. Today, companies in industries such as business services, recurring revenue software, medical and healthcare services, new media, food, and consumer staples have been particularly in demand. But even deals in cyclical industries like restaurants, auto parts, advertising, travel, and hospitality are getting done in today’s hot environment.
That is a function of frothy PE and private credit investor appetite. Even an out of favor industry like retail, particularly brick and mortar retail, has had no shortage of interest from lenders. Asset-based lenders and liquidation firms have been teaming up to finance this sector with a flurry of interest. Just look at the competition to do the recent Sears DIP financing.
2019 is looking a lot like 2018, especially when it comes to the credit markets. The availability of credit remains strong, which is bolstering today’s very active M&A environment.
Financial Buyers vs Strategic Acquirers
There are 5 key differences between financial and strategic business acquirers. There are also reasons why strategic buyers will pay more for your company than a financial buyer. Give me a call or send me an email and I will be happy to elaborate.
