Anyone who accepts the interest barrier in a Leveraged Buyout (LBO) as an unavoidable fate is burning cash – and needlessly suppressing returns. 💸
Every structure memo includes this step: after closing, a tax consolidation group (fiscal unity) is established between AcquiCo and the target to offset operating income against the interest burden.
Yet in larger deals, a massive cash leak often persists in practice:
❌ Net interest expense is generally only deductible up to 30% of tax-adjusted EBITDA.
❌ The interest carryforward provides no benefit in an LBO – because the necessary deleveraging rarely takes place.
❌ Result: A significant portion of interest expense remains unrecognized for tax purposes.
It's remarkable how often this situation is simply accepted as permanent. Yet there is a highly efficient lever that is used far too rarely: leasing.
💡 The key advantage: lease expenses are not subject to the interest barrier!
How to use leasing as a return booster:
🔹 Capex: Lease new equipment directly instead of debt-financing it.
🔹 Digitalization: Structure software & IT projects as leases as well.
🔹 Sale-and-leaseback: Refinance already acquired assets.
The result:
The group's interest expense relevant to the interest barrier decreases,
the tax burden shrinks,
👉 cash flow increases!
At #LeasingPilot, we understand these structural levers and support you in implementing them efficiently.
👉 Does your company have investments coming up in the near future?
👉 Have you already discussed this relief potential with your tax advisor?
Don't leave your effective tax rate to chance.
Let's talk!
#PrivateEquity #LBO #CFO #Treasury
Anyone who accepts the interest barrier in a Leveraged Buyout (LBO) as an unavoidable fate is burning cash – an
