Mergers and Acquisitions Services Amidst Evolving Tax Codes: A Conversation with Sylvie Gadant and Nichol Chiarella 

Sylvie Gadant is the managing partner of the Transaction Advisory Services (TAS) Practice and a partner within Citrin Cooperman’s Private Equity and Capital Markets Industry Practice. She leads buy-side and sell-side due diligence engagements for private equity firms, independent sponsors, family offices, and strategic buyers.

Nichol Chiarella is a partner and Citrin Cooperman's Mergers and Acquisitions Tax Practice Leader, with over two decades of experience in public accounting. She provides high level tax planning and consulting services related to buy-side, sell-side, and restructuring transactions involving private equity firms, closely held businesses, business owners, and high net worth individuals within the technology, manufacturing and distribution, wholesale, retail, cannabis, healthcare, real estate, staffing, and professional services industries.

Gadant: Nichol, it’s a challenging market right now with evolving tax codes. What are you seeing in the marketplace related to business enterprise values?

Chiarella: Where enterprise values end up really depends on the industry and related EBITDA multiple, for the most part, which in today’s world can be impacted directly by the technology they may or may not have in place, and their status in their AI digital transformation. There's potential for a real increase in value related to AI, and sometimes there are even tax attributes that increase enterprise value. Where we may see valuations going down is in situations where there's volatility around tariffs (such as non-U.S. suppliers in the manufacturing and distribution space), and even just the geopolitical climate could severely reduce the purchase price of a business.

Gadant: What do you and your team do to bring value to a merger and acquisition transaction?

Chiarella: It's really unique that we're able to bring the level of expertise that we can to the middle market due to our PE backing, providing capital for us to bring in M&A tax specialists. Previously, those middle-market clients had to go to a big four firm to have access to the type of expertise we can now bring to them. Having the tax specialists in-house allows us to get in early, talk with clients about tax planning, and take a look at their existing structure to maximize benefits that could exist upon an exit.

The other unique traits of our M&A tax team are that we are empathetic towards that business owner due to our long history of working with lower and middle-market clients; that’s the heart of what Citrin Cooperman has done for over 45 years. We understand it’s oftentimes our clients’ one bite at the apple. We want to help clients maximize value and walk them comfortably through the transaction cycle and beyond by working alongside their attorneys, investment bankers, and the rest of their advisors to help them understand what this transaction means for them and their family and the ways they can maximize those net proceeds.

Gadant: How do you and your team help clients prepare for a deal?

Chiarella: Some of the ways our team helps clients prepare for a deal is by getting involved really early in the transaction process. Before the offer letter comes about, before the term sheet, we assess the existing structure and ask the important questions: What has been filed in my financials and my tax returns over the years? Am I really ready to go to market? Is there a way I should be doing estate planning and tax planning before that offer comes across? Because once there's an offer letter, once there's a term sheet, it can really reduce the amount of flexibility we may have to structure into a more tax-efficient exit that's still respected by the IRS from a tax perspective.

Gadant: What's the most important thing a CEO can do before either buying or selling a company?

Chiarella: One of the most important things a CEO should be thinking about when they are considering acquiring a company is to fully understand what they are buying. Has there been a quality of earnings report done for that target company? What's the true value? What should the multiple be and what am I buying from a tax perspective? What tax attributes exist? Sometimes we see clients who don't know that they are acquiring a C corporation, S corporation, or an LLC. That can make a material difference in the tax benefits that follow post transaction for that buyer. Other things CEO should be thinking about on the sell side is; How am I structured today? Is this the most tax-efficient way I should be structured before I go to market? What's the value of my business that a buyer is going to respect when I go to market? Years ago, investment bankers didn't focus so much on a quality of earnings report. But today, it's very difficult to find an investment banker in the middle market that will take on a client and bring them to market without having that QoE report done.

To learn more about how Citrin Cooperman’s dedicated Mergers and Acquisitions Tax Practice can help your business prepare for a successful transaction, please contact Nichol Chiarella or info@citrincooperman.com,