Duff And Phelps Tax Receivable Agreement

The passage of the tax reform last December gave investors greater security when it comes to corporate tax rates in the near future. One of the consequences is an increased interest on the part of some investors in the acquisition of payment rights under so-called “tax receivables” (“TRAs”) agreements. In short, TRAS are agreements entered into by a company (a “Pubco”) as part of an initial public offering (“IPO”) to monetize the tax characteristics of the post-IPO pubco for the benefit of pre-IPO owners and investors who acquire payment rights under TRAs from these pre-IPO owners. Our previous article on TSEs focused on some of the ways in which tax reform could affect the value of AER`s payment entitlements. Since the adoption of the tax reform, we have seen a significant increase in investor interest in acquiring tra payment rights, in particular hedge funds, family offices and private investment funds. This article describes some of the characteristics of an TRA that an investor should analyze before acquiring rights under an TRA. For more information on tra investments, please contact one of the following members of the Ropes & Gray team: Each TRA investment should be considered in light of the specific provisions of the TRA and the facts that apply to each pubco. These specific facts may give rise to specific due diligence issues. However, there are a number of issues to consider, which apply to most TRA payment entitlement purchases, including the following:. . .

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