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Preserve PE portfolio value in ‘distressed’ times

A comprehensive look minimizes cash drains in private equity portfolio companies

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Person with umbrellaBorrowing money and surviving downturns have always been part of the U.S. economy. What is different today is the Tax Cuts and Jobs Act, which has changed the process of assessing, preserving and creating future value around the tax assets of a financially distressed business. New rules abound around net operating loss (NOL) and the deductibility of interest expense, among many other areas. Modeling based on your specific situation has become critical.

Preserving private equity portfolio company value in distressed situations requires a comprehensive analysis around four key components:

  1. Making operational changes to reduce costs and increase revenue
  2. Optimizing capital
  3. Making new growth-driving investments
  4. Ensuring you have the right tax planning and structuring

Making operational changes – perhaps the most critical component – means journeying back to basics, like looking at working capital and how you are managing current assets and liabilities. Are you able to quickly convert accounts receivable into cash? Do you have products that don’t generate sufficient profit or can be streamlined, leading to other revenue streams?

Because ups and downs in the economy are cyclical, you should unravel tax complexities and risks to be well prepared to weather any storms.

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Contacts

Christopher SchenkenbergChris Schenkenberg
Grant Thornton National Managing Partner, M&A Tax Services
T +1 312 602 8987


Bryan BenoitBryan Benoit
Grant Thornton National Managing Partner, Corporate Value Consulting
Partner-in-Charge, U.S. Energy and Advisory Services
T +1 832 476 3620

Barry GrandonBarry Grandon
Grant Thornton Managing Director, M&A Tax Services
T +1 212 542 9690


Richard LiebmanRich Liebman
Grant Thornton Managing Director, M&A Tax Services
T +1 312 602 8220