THE TYPICAL TRANSACTION STRUCTURE - is tax inefficient as it creates two, and sometimes three points of taxation.
This methodology is traditionally used because:
Advisors represent only one side or the other - they rarely see or understand the full transaction.
No one advisor is looking at creating the most efficient total financial structure.
Fortune 500 “corporate” buyout structure is inappropriate/inefficient for most buyouts of closely-held companies.
An example of the typical structure and financial results can be seen in the
BLEVINS FINANCIAL STRUCTURE - creates tax efficiency
by focusing on designing the entire structure to be as tax efficient as possible. Blevins Financial
typically does not represent the buyer or the seller, rather representing the “transaction” as a whole.
This enables more creative and strategic decisions around how to structure the financial flow of the
money - and how to best minimize taxation and other costs across the entire transaction.
An example of the typical results of this restructuring includes:
The ability to deliver the same $4.25M NET to the seller at a total cost to the buyer
of $6.0M - a savings of $2.5M (a 29% savings).
This $2.5M “savings bucket” is generally split between the buyer and seller.
$1.25M increase in the NET (after-tax) received by the seller.
$1.25M decrease in the total cost to the buyer.
BENEFITS CREATED - this reduction in taxation creates several benefits:
Increases the profitability of the transaction to both buyer and seller.
Significantly decreases price pressure for both sides, increasing the
likelihood that a deal can be reached.
Buyers realize a result as if they paid $3.4M for the company, a 32% discount.
Sellers realize a result as if they sold the company for $6.5M, a 30% premium.
Reduces annual cash flow required to service debt structure - making the transaction
more attractive to financial lenders.
Reduces overall risk of the transaction for all parties.