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Aug 16, 2022 - 10:16am
overandout, what's your opinion? Comment below:

If the asset cost basis is higher than the equity cost basis, all else equal you would want to do an asset sale. Taxable gain for an asset sale would be $100 - $50 = $50; $50 * 20% = $10 taxes. Taxable gain for an equity sale would be $100 - $0 = $100; $100 * 20% = $20 taxes.

In practice however, there could be reasons that you would not want to do an asset sale. The one that immediately pops to mind is that if there are a bunch of contracts in place w/r/t the assets of the business, those contracts may require counterparty consents to transfer to a new legal owner of the assets, which could create a bunch of issues because those counterparties may hold up the sale process (in terms of pure timing to get consents) and may want to renegotiate terms. A solution to this might be a section 338 election (which is an equity sale but gets treated as an asset sale for tax purposes), but you can only do that in specific situations.

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Aug 16, 2022 - 1:52pm

are these things you're expected to learn on the job in your IB stint prior to PE or things you would learn studying up - seems pretty nuanced and not all analysts would get deal experience with this

Aug 16, 2022 - 2:25pm
overandout, what's your opinion? Comment below:

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