Specialty Tax Spotlight – Rollovers and Transactions

Specialty Tax Spotlight

On this episode of Weaver: Beyond the Numbers, Specialty Tax Spotlight, hosts Sean Muller, Aaron Bosch and Jon Pezzi provide insights into the role of rollovers in business transactions. They investigate the complexities and discuss its crucial importance for both buyers and sellers.

Key Points:

• Rollovers are key in business transactions, serving as incentives to keep key personnel engaged post-acquisition.
• The tax implications of a rollover largely depend on the transaction’s structure. In certain scenarios, a rollover can be tax deferred.
• With tax-deferred rollover, buyers won’t receive a full step-up in the tax basis of the target’s assets, which can lead to a difference in anticipated tax amortization/cost recovery compared GAAP amortization and depreciation in audited financial statements.

As the hosts explored the complexities of rollovers in business transactions, they mentioned how rollovers work to motivate sellers to sustain ownership and continue contributing to the business. Additionally, the discussion highlighted the significance of early decision-making to avoid last-minute restructuring setbacks.

Buyers often offer essential members of the seller’s party units in the new entity in lieu of cash, keeping them committed to the company’s future prosperity. On the selling side, rollovers can prove tactically advantageous during disagreements over purchase prices. Pezzi explained, “From a sell side, let’s say you have a disagreement on the purchase price, and you have a lot of belief. You can also push for a rollover to potentially get an interest in the future entity because you believe it’s going to grow more than what … the buyer might have tried to give you.”

The episode stressed the need for strategic thinking and early decisions on rollovers in business transactions to ensure a smoother negotiation process. A well-planned rollover can be advantageous for both the buyer and the seller and can ensure the continued growth and prosperity of the enterprise.

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