Independent Sponsor 338(h)(10) Elections in Specialty Chemicals
Securities and M&A counsel for independent sponsors structuring specialty chemicals transactions, from LOI to close to the capital markets that open up afterward.
The economics on a specialty chemicals platform deal usually hinge on a handful of structural decisions. 338(h)(10) Elections is one of them.
The typical specialty chemicals platform sits at $15M to $200M EV with EBITDA in the $3M to $28M range. The thesis runs on niche formulator or contract manufacturing buy-up. The IP lives in the formulator's head as often as in the company. Structure for that risk explicitly.
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 specialty chemicals, layer in chemical inventory transfer filed 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.
Transaction Fee Structuring for Specialty Chemicals
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Working Capital Adjustments for Specialty Chemicals
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Representation & Warranty Insurance for Specialty Chemicals
A buyer-side insurance product covering breach of seller representations, reducing seller escrow and indemnit…
Indemnification for Specialty Chemicals
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 Specialty Chemicals, 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.