Energy Services Deals: 338(h)(10) Elections Done Right
Structuring 338(h)(10) Elections on energy services deals, with the structure protection and capital connectivity an independent sponsor actually needs.
338(h)(10) Elections on energy services deals is one of those workstreams that looks routine on a checklist and decides outcomes in practice.
The typical energy services platform sits at $10M to $140M EV with EBITDA in the $2.5M to $24M range. The thesis runs on regional oilfield service or renewable services consolidation. Underwrite the trough, not the peak. Capital partners will.
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 energy services, layer in earnout indexed to gross margin instead of revenue 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.
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.
Related deal pages.
Transaction Fee Structuring for Energy Services
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Working Capital Adjustments for Energy Services
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Representation & Warranty Insurance for Energy Services
A buyer-side insurance product covering breach of seller representations, reducing seller escrow and indemnit…
Indemnification for Energy Services
The seller's contractual promise to compensate the buyer for breaches of representations, covenants, and spec…
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An LOI on the desk, a energy services target, and a 338(h)(10) Elections question worth a real conversation.
Twenty minutes of practitioner-grade input from a securities attorney whose first move is to read the deal, not the engagement letter.