Academics, tax practitioners, and members of both political parties in the US have criticized the so-called carried-interest loophole for many years.1 Although a recent proposal to close the loophole estimated the US Treasury would only collect an additional $17 billion in revenue over ten years,2 the loophole continues to receive criticism due to its political…
Tag: Private Equity
Another Bankruptcy: Sears-ly
What is the store you go to for everything – your “everything store”?1 It used to be Sears. Sears Holdings Corporation’s Chapter 11 bankruptcy filing has reignited the question of how to keep a company afloat in the modern world of retailing.2 After seven straight years of losses, hedge-fund manager and former Sears CEO Edward…
Understanding the SEC’s Recent Crackdown on Private Equity
In the last few years, the private equity market has continued to balloon. In 2015, there was $2.4 trillion in private equity assets under management and the market as a whole saw an aggregate value of total buyout deals hit $411 billion.1 In comparison, there was $716 billion of total assets under management in the…
New Chapter for Fraudulent Conveyance in LBOs?
In the wake of the 2008 financial crisis, many companies that were the targets of Leveraged Buyouts (LBOs) filed for bankruptcy.1 In an LBO, creditors secure their loans against the target company’s assets, subordinating the claims of the target’s pre-LBO creditors. Thus, should the LBO fail and the target company file for bankruptcy, its pre-LBO…
Citi Faces (a Very Minor) Slap on the Wrist
In response to the financial crisis of 2007-2008, Congress passed the Dodd-Frank Act to bolster financial regulations and monitor Wall Street behavior. Included in the Act were amendments to Rule 506 of the Securities Act of 1933.1 Rule 506 is part of the Regulation D exemption, which allows issuers to raise capital for private offerings….
Burger King-Tim Hortons Merger: Another Corporate Desertion or Good Business Strategy?
In late August, Burger King announced that it intended to acquire the Canadian coffee and donut chain Tim Hortons for $11 billion.1 The combined company will be headquartered in Canada.2 By purchasing Tim Hortons, Burger King has faced criticism that it is yet another U.S. corporation deserting its country for tax advantages.3 In the last…
Top Private Equity Firms Settle Lawsuit
Private equity firms usually have money on the mind. They aim to make money for their investors by buying companies and selling them at a profit, while pocketing management and performance fees for themselves. In the competitive world of Wall Street, performance is critical – but for some of the biggest private equity funds in…
Divergent Incentives in Secondary Buyout Transactions Cause Limited Partners to Shoulder Downside Risk Alone
Over the past year secondary buyout transactions have become the increasingly common move of primary private equity fund managers seeking to exit their portfolio company investments in Europe and the United States. Secondary buyouts, also referred to colloquially as “pass the parcel” deals, occur when one private equity firm sells its stake in a portfolio…
The Intersection of Private Equity and ERISA after Sun Capital
In July 2013, the U.S. Court of Appeals for the First Circuit ruled in Sun Capital Partners III, LP v. New England Teamsters & Trucking Industry Pension Fund that a private equity fund was considered a “trade or business” under the rules of the Employment Retirement Income Security Act of 1974 (“ERISA”).1 Under this standard, a private equity fund…
Private Equity Investment in Farmland
“Buy land, they’re not making it anymore.” – Mark Twain Financiers have been investing in farmland for centuries, from the Roman empire being fed by farms in North Africa to American fruit companies buying plantations in Central America.1 Now, nearly 200 private equity firms are expected to have almost $30 billion in private capital invested…