Tame the Tax Gross-Up’s Impact on Deal Economics

Parties to transactions in which tax gross-ups are contemplated should pay close attention when negotiating the terms of tax gross-up provisions — similar to how they manage other terms affecting deal economics.

On September 18, 2024, the Federal Open Market Committee reduced the target range for the federal funds rate by half a percentage point with more rate cuts expected in the near future. Many investment banks and corporate attorneys view this as a welcome change as it likely will increase deal-making activity in the mergers and acquisitions (M&A) space by reducing the cost of borrowing.

The expected increase in ...