medium · Investment Banking

Why might the buyer prefer this over a standard stock purchase?

1. It allows the buyer to use the target's existing Net Operating Losses (NOLs) without any statutory limitation.
2. It allows the buyer to avoid paying a control premium to the target's existing shareholders in the deal negotiations.
3. It allows the buyer to step up the tax basis of the assets and claim higher depreciation/amortization tax shields.
4. It eliminates all pre-existing liabilities of the target company as a matter of law, regardless of the deal structure chosen.

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