Why economic incentives?

Economic incentives and site selection are an often-overlooked tool for private equity groups and portfolio companies to increase earnings before interest, taxes, depreciation, and amortization (EBITDA.)

While most firms focus on EBITDA and opportunities to maximize organizational value, the most strategic groups find extra value through state and local incentives and location based cost minimization. It is important to go a step further and emphasize a strategic approach to understand the impact state and local economic incentives can have on portfolios.

 

Learn why private equity firms choose our team for economic development incentives

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    McGuire Sponsel Private Equity

    Watch the recording: Economic Development for Private Equity

    As private equity firms dive into an emerging 2021 economy, firms have tremendous opportunity as cities and industries rebound from the impacts of 2020. Economic development incentives are often overlooked and can be a golden key to driving EBITDA and exit value as firms tap into incentives at the local, state, and federal level. Register and join our team to learn how a strategic approach to incentives and site selection can create value across your portfolio.

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    When should you consider incentives?

    Private equity groups should be prepared to explore incentives anytime a portfolio company is ready to relocate, expand, make capital investments, or add new jobs. These changes can trigger opportunities for potential tax and operational cost savings. The location of an operation is particularly important, as it can have a profound effect on cash flow, operating costs, workforce, and ultimately, the profitability of your organization.

    McGuire Sponsel Private Equity

    How to reduce costs and create value

    Anytime you purchase a company, increase workforce, or invest in capital expenditure (CAPEX,) you may have an opportunity to reduce costs and/or create value. State and local governments compete for businesses like those in your portfolio by offering incentives such as property tax abatements, tax increment financing, grants, exemptions, and tax credits. Many of these incentives directly affect EBITDA. Incentives that do not affect operating income or EBITDA may still provide significant cash flow benefits by reducing income taxes.

    Economic Development Incentives Overview

    To attract and retain growing businesses, state and local governments often provide valuable economic incentives including tax abatements, payroll tax credits, infrastructure grants, low- or no-interest loans, training grants, tax increment financing, and more.

    When your firm or portfolio companies are ready to relocate, expand, make capital investments or add new jobs, McGuire Sponsel can guide you through taking advantage of these economic incentives and assisting you through the process.