Independent Sponsor 338(h)(10) Elections in Marketing Agencies
Securities and M&A counsel for independent sponsors structuring marketing agencies transactions, from LOI to close to the capital markets that open up afterward.
The economics on a marketing agencies platform deal usually hinge on a handful of structural decisions. 338(h)(10) Elections is one of them.
The typical marketing agencies platform sits at $5M to $80M EV with EBITDA in the $1.5M to $14M range. The thesis runs on specialty agency or holdco platform with bolt-ons. If the founder leaves, half the agencies in the market lose 25% of revenue. Structure for that.
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 marketing agencies, layer in client roster scrubbed for top-five concentration 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.
Most independent sponsors solve the closing capital and then run into the post-close capital problem alone. The capital markets relationships that matter at month 18 are part of this practice.
Related deal pages.
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Representation & Warranty Insurance for Marketing Agencies
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Indemnification for Marketing Agencies
The seller's contractual promise to compensate the buyer for breaches of representations, covenants, and spec…
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338(h)(10) Elections for Marketing Agencies, on independent sponsor terms.
Independent sponsor counsel that already speaks fluent deal-by-deal economics, structures clean LPAs, and travels with capital markets relationships for what comes after close.