Close · Auto Aftermarket

338(h)(10) Elections for Auto Aftermarket Independent Sponsors

Securities and M&A counsel for independent sponsors structuring auto aftermarket transactions, from LOI to close to the capital markets that open up afterward.

EV range $8M to $90M EV EBITDA $2M to $16M Audience Buy-side / Sponsor
The deal context

The economics on a auto aftermarket platform deal usually hinge on a handful of structural decisions. 338(h)(10) Elections is one of them.

The typical auto aftermarket platform sits at $8M to $90M EV with EBITDA in the $2M to $16M range. The thesis runs on service-center or specialty-shop regional roll-ups. Technician shortage is the single biggest valuation risk. Underwrite the bench, not the bays.

The moves

How 338(h)(10) Elections actually gets structured.

  1. Run a side-by-side tax model showing the seller's grossed-up purchase price requirement.

  2. Document the election in the purchase agreement, with required IRS forms attached.

  3. Confirm the seller's eligibility, including the consolidated group structure.

  4. Plan the tax gross-up payment, often funded out of the buyer's price.

  5. In auto aftermarket, layer in technician retention pool defined and funded as part of the 338(h)(10) Elections workstream.

The common mistake

Demanding a 338(h)(10) without offering the seller a tax gross-up. The election only works if the math works for the seller too.

Jason's take
"338(h)(10) is a buyer benefit you have to pay for. Price it into the LOI, not the surprise column."
Jason Powell · 338(h)(10) Elections
Capital after close

The deal is one thing. The capital that opens up after close is another.

Refinancing, recaps, growth rounds, and the right strategic conversation eighteen months early are all downstream of relationships that take years to build and minutes to use.

MONTH 18
Senior refi
MONTH 24
Dividend recap
MONTH 36
Growth equity
YEAR 4–5
Strategic exit
WORK WITH JASON

Bring the auto aftermarket deal. Get 338(h)(10) Elections done right.

Direct counsel from a securities and M&A attorney with billions in structured transactions, the independent-sponsor-native playbook, and the capital markets network that opens up post-close.