Hi All,
This may be a stupid question since I've never come across it, but it is something I read on an earnings call transcript and can't seem to find an answer for anywhere on the internet.
What is "NPV Tax Benefit"?
The context was as follows: "The purchase price is $400mm, we've received a $30mm NPV Tax benefit which yields a net purchase price of $370mm."
Depending on the structuring of a transaction (e.g., asset deal or 338(h)(10) election), there can be a step-up in the tax basis of assets that results in post-closing amortization. This amortization will generate tax savings going forward. For example in the case where there is an increase in goodwill, that would be amortized over 15 years for tax purposes. It's common practice to calculate an NPV of those tax savings and to present purchase price metrics net of the NPV of those tax benefits.
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