Using NOL asset during acquisition?

newkid2019's picture
Rank: Baboon | banana points 100

Hi guys:

I have a quick question on how to understand the following situation please:

Let's say a fund has a holding company with significant NOL assets. How can they use the NOL assets as an advantage in the bidding process for acquiring assets (esp those sold off during bankruptcy sales process) please? I'm having trouble understanding why that might be advantageous from a tax perspective, etc.

Thanks!

Private Equity Interview Course

  • 2,447 questions across 203 private equity funds. Crowdsourced from over 500,000 mem.
  • 9 Detailed LBO Modeling Tests and 15+ hours of video solutions.
  • Trusted by over 1,000 aspiring private equity professionals just like you.

Comments (3)

Feb 3, 2019

Presumably the assets for sale will generate taxable income. Assuming the appropriate structure, the holding company can offset some of the acquired assets' taxable income with the NOL. Fewer taxes means more $ left for the equity investors in the holding company, so everything else equal (forecasts, required returns, etc) the buyer with the NOL will expect to generate more value and therefore have higher willingness to pay.

    • 1
Feb 2, 2019

Thank you! @petergibbons

Feb 4, 2019
    • 1