Question by Oppenheimer: What does this statement really mean regarding private equity firms?
“reaping huge gains by piling debt on companies their firms have acquired, only to deduct the interest from their corporate taxes”.

I understand the statement, but do not understand how this is a successful strategy, or how they have a competitive advantage using this strategy.

Best answer:

Answer by striker_rage
I think it means that the company creates are subsidiary of the company.

Then it transfers all the debt to the newly created company so that it can report no profits on the new company.

Thus reap benefits since the tax would be loss since the new company is in losses.

Know better? Leave your own answer in the comments!

Email This Post Email This Post