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Thinking of entering into a GP stakes transaction? Whether you're a seller looking to raise growth capital or a buyer eyeing a strategic investment, the nuances of these deals extend far beyond just the numbers. In this extended cut audiocast episode, PwC’s Amy McAneny is joined by Brian Rebhun to unpack the growing popularity of GP stakes. They dive into the tax complexities and structural considerations critical for both buyers and sellers in today's dynamic market.
Key takeaways
- What is a GP Stakes transaction?
- Selling an ownership interest in a general partner or management company to fund growth, support succession, or unlock liquidity.
- Three main drivers for sellers:
- Growth capital (e.g., fund launches, team expansion)
- Liquidity (succession planning, diversification)
- Hybrid (de-risking while continuing growth)
- Sell-side readiness essentials:
- Define the deal perimeter (for example: type of investment, types of income streams)
- Clean, auditable financials and clear org structures
- Be ready for buyer concerns: Unrelated Business Taxable Income (UBTI), Effectively Connected Income (ECI), Hot assets, Tax nexus
- Tax considerations for sellers:
- Primary vs. Secondary transactions impact character of gain
- Purchase price allocations matter, especially for secondary transactions
- Structuring proceeds for tax efficiency is critical
- Buy-side must-knows:
- Blocker entities may be necessary for UBTI/ECI-sensitive investors
- Understand income streams by asset class (for example: direct lending vs. PE)
- Diligence around phantom equity and information rights is vital
- Deal structuring advice:
- Flexibility and foresight are key
- Consider common vs. preferred equity, profit interest, and reporting obligations
- Start early and involve advisors to minimize deal friction
Segmented topics with timestamps:
- 0:00 – Introduction to GP Stakes and market activity
- 0:39 – What is a GP Stakes transaction? Buy vs. Sell side
- 2:05 – Sell-side drivers: Growth capital, liquidity, hybrid
- 3:33 – Sell-side readiness and tax implications
- 5:53 – Tax nuances: Primary vs. Secondary, 754 Elections
- 8:56 – Buy-side considerations: Tax, income streams, blocking
- 10:53 – Deal structuring, information rights and complexity
- 13:10 – Final advice for buyers and sellers
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