Tax Shield
What It Means
A Tax Shield is a deduction that reduces a person or company’s taxable income.
Why It’s Important
Tax Shields are a common part of Acquisition strategy. Buyers pursuing an Asset Purchase are likely counting on the Tax Shield provided by the depreciation and Amortization from the stepped-up asset values. Those expected tax savings provide ongoing value to Buyers and should be factored into the Enterprise Value of the company being purchased.
Related Terms
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