Driving Value for Private Equity Firms
Economic incentives and site selection are an often-overlooked tool for private equity groups and portfolio companies to increase cash flow, EBITDA, and value of portfolio companies.
While most firms focus on EBITDA and opportunities to maximize enterprise 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.
Our expertise supports firms both pre- and post-acquisition, and we maintain an ongoing dialogue with our private equity partners to ensure long-term goals are met. Our site selection experience can identify often overlooked incentive value to firm portfolios or target companies ready to relocate, expand, make capital investment, or add new jobs.
Learn why private equity firms choose our team for economic development incentives
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Economic 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.
Credits and incentives are also highly time sensitive. Because credits and incentives are designed to encourage specific activities, they generally must be secured before a company publicly commits to a project.
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. 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. Reach out to our team today if any of the below are relevant to your portfolio companies:
- Adding 15 or more jobs over 5 years
- Buying, leasing, expanding, or building a facility
- Purchasing $1 million or more in new equipment
- Acquiring or merging with another business
- Relocating operations
Case Studies
- G&H Orthodontics
- Pretzels, Inc.
G&H expanded their operations and found a new location for its headquarters. Considering locations throughout central Indiana, the company found a home in Franklin, Indiana after consulting with McGuire Sponsel for site selection and incentive procurement. McGuire Sponsel negotiated and worked with both the Indiana Economic Development Corporation (IEDC), and the Franklin Economic Development Commission to procure tax incentives. The company’s growth project will add 154 new jobs to the state of Indiana, all of which include headquarter and production positions.
Pretzels was considering significant capital investment to increase capacity, including expanding its facility in Plymouth or locating a new facility. A new or expanded facility would require $70M in new real estate and equipment and 150+ new employees. Pretzels, Inc. hired McGuire Sponsel to negotiate and procure economic incentives on their behalf in support of the company’s considered expansion/relocation. McGuire Sponsel assisted with a financial analysis for multiple sites and negotiated to procure tax credits and incentives to assist with expansion in Plymouth.
Meet Our Private Equity & Incentives Experts
Our team is comprised of experts in the field of economic development as they all have decades of combined experience working for public institutions. They will use their knowledge and contacts to develop the best possible outcome for our clients.
