Credits and Incentives Can Add Real Value to Your Deal
May 15, 2015
PitchBook Dealmakers Column
Companies traditionally pursue state and local tax credits and economic incentives when they are investing new capital and creating new jobs. Economic development agencies are interested in helping companies achieve their growth goals while attracting or retaining jobs and workforce skills in their local communities. M&A activity has not always been a focus area of these agencies, or the companies themselves. However, capital investment into an existing company as a new owner is increasingly recognized by state and local agencies, and private equity investment is clearly part of that trend.
When PE firms are acquiring businesses in new locations, the activity may be treated as original investment in a community even if the acquisition does not include new jobs or construction. Too often, private equity investors overlook the opportunity to take advantage of statutory and discretionary incentives because they are unaware of what is offered or how the local agencies respond to M&A activity.
New owners represent an opportunity for state and local representatives to establish relationships that are centered on a shared interest in economic growth of the community. Companies want a vibrant business community with a strong workforce, and agencies want a strong business base and solid employment opportunities for their constituents. For these reasons, M&A activity creates an opportunity to discuss and secure financial and economic incentives that may ordinarily be overlooked and can even add value to a deal.