There Goes Another Loophole

Hahn, Avital Louria
June 2003
Investment Dealers' Digest;6/16/2003, Vol. 69 Issue 24, p15
Trade Publication
A tried-and-true rule in the M&A market is that the last bit of value a money-losing firm has is the potential tax write-off it could provide an acquirer. But recent changes to the federal tax code have at last closed that loophole, leaving hundreds of potential acquirees in merger purgatory. Before the changes, acquirers would often deduct net operating losses of the acquired company from their own money-making operations-now it is much more difficult to do that. While other factors that drive deals-including acquirer cash reserves and exit strategies-could still play a role in creating new activity, for many small money-losing companies, the one reason for being acquired-tax write-offs-has been all but eliminated.


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