Limit on Interest Expense Deduction Could Affect Deal Structures

Among its many changes, the new tax reform bill limits the interest expense deduction, which plays an important role in many transactions involving the sales of businesses. This article explains how the limit could reduce the value of a business and affect how transactions are structured going forward. It also discusses the potential effects on leveraged companies, as well as how rising interest rates could further undercut a business’ value under the change.