Tax - Private Equity
McDermott Will & Emery advises private equity funds on all U.S. and cross-border aspects of taxation. Our international team of private equity tax lawyers represents all types of investments funds, pooled investment vehicles, fund sponsors and fund investors. We act on behalf of LBO funds, hedge funds, private equity divisions of investment banks, venture capital funds, mezzanine funds, public permanent capital vehicles, public fund managers, fund-of-funds, general partners, fund managers, and U.S., international, tax-exempt and institutional investors. Our clients range in size from first-time funds to funds with billions of dollars of assets.
We serve our private equity clients at each stage of the private equity fund life cycle: fund formation and management; fund transactions and investments; optimizing fund and portfolio company operations; and exit planning. We also provide tailored U.S. inbound services to international and offshore funds undertaking U.S. fundraising, establishing U.S. offices, and making U.S. investments. Our services are delivered through 14 offices in the United States and Europe, as well as a strategic alliance with MWE China Law Offices in Shanghai, and the McDermott International Tax Panel comprised of affiliates in approximately 20 additional countries. We tailor our services to the needs of each client in order to reduce global taxes and increase economic returns for investors, sponsors, and general partners.
McDermott’s Tax Private Equity Practice Group is part of one of the oldest and largest law firm tax practices in the world. Our tax services are complemented by multi-disciplinary, full-service practice groups focused on fund formation and management, private equity/emerging companies, hedge funds, M&A, securities, banking and finance, employee benefits, executive compensation, trial, health care, real estate, energy, structured finance and capital markets. With multidisciplinary depth and broad international reach, we deliver efficient, cutting-edge tax solutions to our private equity clients, regardless of location and time zone.
Our clients are based in more than 70 countries and include some of the largest and most visible private equity firms and financial institutions around the world. We have advised on the largest private equity firm buyout in history, one of the largest ESOP buyout transactions ever completed and novel public offerings by private equity funds. We are ranked as a top-tier global law firm in tax, private equity, and M&A.
Tax Private Equity Services
Fund Formation & Management
We develop diverse fund structures, including U.S. funds, offshore funds and alternative investment vehicles such as parallel, blocker and feeder structures. We work with our clients to reduce risks related to entity-level taxation, phantom income, anti-deferral tax regimes (e.g., CFCs, PFICs and subpart F), unrelated business taxable income (UBTI) and taxable presence (e.g.,U.S. trade or business, permanent establishment, and management and control).
We organize funds, managers and holding companies in numerous favorable jurisdictions. Recent examples include the Netherlands, Luxembourg, Denmark, Spain, Malta, Cyprus, Mauritius, Singapore, the Cayman Islands and Bermuda. Our fund structures routinely result in bilateral income tax treaty benefits and reduced taxes in multiple jurisdictions.
Through multi-disciplinary service teams, we advise on deal terms, securities laws, pension laws and other federal and state laws. We draft fund organizational documents, limited and general partnership agreements, private placement memoranda, subscription agreements, parallel agreements and side letters.
Global Fund Transactions & Investments
In representing our private equity clients, we bring to bear the depth and reputation of McDermott’s tax M&A and international tax lawyers. We advise on all types of private equity transactions, including early and later-stage investments, U.S. and cross-border leveraged buyouts, roll-ups, recapitalizations, acquisitions of multinational corporate groups, IPOs, going private transactions, PIPEs, ESOP buyouts, acquisitions of flow-through entities (e.g., partnerships, S corporations, LLCs and other non-US flow-through entities) and management rollovers.
In the international arena, we have decades of experience structuring and implementing offshore holding companies, internal leverage structures, techniques to reduce phantom income, mechanisms to efficiently repatriate earnings across borders, and strategies to reduce U.S. and local country taxes. With the broad reach of our international offices and the McDermott International Tax Panel, we can efficiently lead and execute multi-jurisdictional private equity assignments.
Furthermore, our clients can draw upon our deep experience in health care, intellectual property, capital markets and various other disciplines. Such in-house capabilities permit us to undertake transactions involving complex financial products, investments in regulated environments, and highly specialized investment strategies (e.g., biotech royalty streams, health care acquisitions, real estate, energy and tax credits).
Optimization of Fund & Portfolio Company Operations
Tax invariably has an ongoing impact on fund and portfolio company economics even years after formation and investment. In the current private equity environment, funds continue to expand in terms of size and geography. Funds must therefore navigate through the complexity and interaction of local, state, federal and international tax laws. However, most funds do not maintain internal tax departments.
Historically, McDermott has represented many of the world’s largest companies as special tax counsel. Our rich tradition in tax, coupled with the size and depth of our tax practice, uniquely positions us to assist funds with the general oversight of fund and portfolio company tax matters, as well as with the implementation of tax strategies at the portfolio level.
As fund tax counsel, we cover the full spectrum of tax matters, including fund allocation and distribution plans (waterfalls); consolidated return and group relief issues; incentive compensation; portfolio company restructurings, portfolio-level anti-deferral tax regime planning; follow-on investments; refinancings; tax deduction and attribute planning; foreign tax credit planning; bilateral income tax treaty qualification; qualified dividend income certification and cross-border cash movement. We also advise on tax reporting, disclosure and compliance obligations.
With assistance from our tax controversy and U.S. state & local tax practices, we represent funds and portfolio companies in connection with local, state, federal and international tax controversy matters including: transfer pricing disputes, the preservation and protection of privilege and attorney work product, preparation of tax audit responses, representation before taxing authorities in appeal, representation before competent authority, and before courts in the United States and abroad. In the United States, we represent funds before the Internal Revenue Service, the Treasury Department, and Congress in order to obtain favorable tax rulings or achieve other administrative or legislative resolution of tax issues.
Exit Planning
In addition to sale or IPO, there are numerous alternatives that may achieve a full or partial exit from an investment. McDermott regularly assists funds with sales of U.S. and international portfolio companies, repatriation of earnings from international investments, portfolio company separation transactions (e.g., spin-offs and split-ups), and planning for the efficient distribution of earnings to investors and general partners. We also represent funds (permanent capital vehicles) and fund managers selling interests or raising capital in the public markets.
International Funds & U.S. Inbound Investments
International funds raising capital in the United States, establishing an office in the United States and making U.S. investments have unique needs. McDermott advises non-U.S. domiciled funds on a broad range of U.S. issues, including: registration under, or exemption from, U.S. securities laws; minimizing U.S. taxable presence risks for the fund and its investors; executing U.S. acquisitions, buyouts and debt investments; purchases and sales of U.S. real property interests; qualification for bilateral income tax treaty benefits; reduction or elimination of U.S. withholding taxes on interest, dividends and royalties; structuring inbound management and service structures that are tax efficient and comply with U.S. securities laws; inbound financing and related U.S. limitations on earnings stripping and conduit arrangements; and strategies to exempt from U.S. tax gains on exit transactions.
We commit our international resources to help our private equity clients navigate through the complexity of local, state, federal and international tax laws at every stage of the private equity life cycle. Our Tax Private Equity Practice Group assists in delivering reductions in global tax and increasing economic returns for investors, sponsors and general partners.
Contacts
- Gary C. Karch
+1 312 984 7543
Send E-mail
