The following Tax guidance note provides comprehensive and up to date legal information covering:
This Practice Note looks at tax issues arising on money borrowed by the acquisition group to finance a private equity-backed buyout.
In the context of private equity, a buyout is a common form of acquisition which is backed by a private equity firm. A buyout can take many forms with two of the most common being management buyouts (MBOs) and secondary buyouts (SBOs). These involve the participation of the investing private equity firm and the existing management team of the target company or business (referred to in the rest of this note as target). An acquisition group is usually set up to acquire target, with the private equity firm commonly retaining the majority interest in target after the buyout and the management team holding a minority stake. For more information on the different types of buyout, see Practice Note: What is a management buyout?
Most buyouts will be financed through a mixture of debt and equity. The proportions will vary depending on the deal but often, a majority of funds are sourced from debt (for more, see Practice Note: How is a management buyout financed?). This Practice Note looks at the tax issues arising for a UK acquisition group in respect of this debt element of the financing. In particular, it answers the following questions:
what are the main types of debt finance
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