Excluded Transactions – What types of transaction are not a fit for Leeward and what are the exceptions?
C-Corporations: The double taxation of C-corporations creates an additional level of tax as C-corps pay capital gains on the sale of the assets and then shareholders have to pay dividend tax on the distributions. Exceptions include C-corporations with large operating losses carryforwards.
SaaS Businesses: If the company’s revenue is based largely on license income, it is not a fit. The S2S does not work for SaaS businesses as the technology and data assets of a SaaS company are the income producing assets of the business. The S2S is a fit only if the company’s technology and data support whatever product or service the company provides, rather than being the product in and of itself. Example: An online lead generation business that earns revenue from the sale of leads is a fit but if the company is licensing its lead generation technology to its customers, it is not a fit.
Distressed: Turn-arounds and restructurings are not a fit.
Pure Debt Recapitalization: If proceeds are used to exclusively payoff existing debt, the S2S will not generally be a fit unless the company or its shareholders have net operating loss carryforwards.