In order to influence possible withdrawals and stock exchanges, investors generally enter into two agreements before the IPO: the adoption of tax reform last December gave investors greater certainty about corporate tax rates in the near future. One consequence is the increased interest of some investors in acquiring payment rights under existing tax receivable agreements (TRAs). In short, ACCORDS are agreements made by a company (a “pubco”) as part of an IPO to monetize Pubco`s tax attributes after the IPO for the benefit of owners prior to the IPO and investors who acquire payment rights under TRAs to such pre-IPO owners. Our previous article on ARTs focused on some ways in which tax reform could affect the value of TRA payment rights. Since the introduction of tax reform, we have seen a marked increase in investor interest in the acquisition of TRA payment rights, including through hedge funds, family offices and private trust funds. This article describes some of the functions of an AED that an investor should analyze before acquiring rights under an AER. Following the IPO, investors may either retain their shares in the operating hobby unit or decide to liquidate their shareholding prior to the IPO. In this case, prior to the IPO, investors may either exchange a portion of their shares for cash contracted as part of the IPO, or exchange those shares for publicly traded PubCo Class A common shares. “Comments from the Front” gives PwC an overview of current economic issues, our perspective on the complexity of financial reporting, and what companies should think about to effectively address these issues. For more information, see www.pwc.com/us/cmaas. In recent decades, the popularity of up-C structures as a means of access to capital markets for companies considering an IPO has increased considerably. An up-C structure can be used by companies in all sectors and sectors, but it is particularly common in private equity holding companies. For more information on investments in ARTs, please contact one of the following members of the Ropes-Gray: An Up-C structure that can offer significant benefits to any organization that wants an IPO.
Companies should conduct a thorough review when selecting an optimal ipo structure for their release and begin planning in a timely manner before their IPO. Key stakeholders should be identified at an early stage in the restructuring process and companies should assess the resources required to meet the requirements for maintaining a business structure and passing and complying with SEC requirements. In the accompanying example, the operational sleight-of-hand unit has its first interests, so that each entity has the same economic rights.