medium · Investment Banking

In an M&A transaction, what does the creation of a Deferred Tax Liability (DTL) usually represent?

1. The transaction fees that are capitalized on the balance sheet
2. The tax impact of the step-up in the fair market value of tangible and intangible assets
3. The amount of Net Operating Losses that the buyer can use to offset future income
4. A cash payment the buyer must make to the IRS immediately at closing

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