338(h)(10) Elections Counsel for Cybersecurity Services Acquisitions
Securities and M&A counsel for independent sponsors structuring cybersecurity services transactions, from LOI to close to the capital markets that open up afterward.
The economics on a cybersecurity services platform deal usually hinge on a handful of structural decisions. 338(h)(10) Elections is one of them.
The typical cybersecurity services platform sits at $10M to $130M EV with EBITDA in the $2.5M to $22M range. The thesis runs on MSSP or specialty consulting platform. Cleared workforce is the moat. Cleared workforce can also be the deal-killer in CFIUS reviews.
How 338(h)(10) Elections actually gets structured.
Run a side-by-side tax model showing the seller's grossed-up purchase price requirement.
Document the election in the purchase agreement, with required IRS forms attached.
Confirm the seller's eligibility, including the consolidated group structure.
Plan the tax gross-up payment, often funded out of the buyer's price.
In cybersecurity services, layer in FSO succession plan in place as part of the 338(h)(10) Elections workstream.
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.
"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
The deal is one thing. The capital that opens up after close is another.
Capital after close is where the IRR actually gets made. The right introductions at month nine through month thirty are where this practice works as hard as it does at the LOI.
Related deal pages.
Transaction Fee Structuring for Cybersecurity Services
The fee paid at closing to the independent sponsor for sourcing, structuring, and closing the platform deal a…
Working Capital Adjustments for Cybersecurity Services
The closing-date true-up that protects the buyer from receiving a business stripped of normal-course working …
Representation & Warranty Insurance for Cybersecurity Services
A buyer-side insurance product covering breach of seller representations, reducing seller escrow and indemnit…
Indemnification for Cybersecurity Services
The seller's contractual promise to compensate the buyer for breaches of representations, covenants, and spec…
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Bring the cybersecurity services 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.