Do PE Firms do stock or asset purchases?
I read that M&A deals have stock, asset or section 338 purchases. But do PE firms and search funds do asset or stock purchases in their leveraged buyouts? What if the PE Firm acquires a private company; is that a stock or asset purchase? I am confused.
We do both, my man. It depends on the structure of the company we're buying, the scenario in which we're buying it, and a number of other factors. Most favored approach is probably a 338(h) election to have the best of both worlds (step-up in basis and effective stock purchase treatment)
I see, that makes sense, thanks! And if the PE firm is acquiring a private company, can you only do an asset purchase or section 338? If a company is private then a stock purchase won't make sense cuz the company doesn't have stock, right?
A private company still has stock (or units). Stock is just the equity of the business. Every profitable company has equity.
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