Traditional tax due diligence often focuses on identifying risks and ensuring compliance, but this narrow lens can cause investors to overlook opportunities to enhance value. Leading private equity (PE) firms are expanding their diligence approach to uncover structural and operational opportunities that accelerate returns and shorten payback periods.
This article explores two often underutilized opportunities:
- State and local incentives
- Property tax assessments
When identified early and integrated into transaction planning, these ideas may unlock additional value beyond risk mitigation and compliance. Both topics are explored in greater depth in our comprehensive eBook for PE professionals.
State and local incentives
Investors often overlook how public-sector programs can subsidize significant value creation. The core diligence questions are simple: What incentives exist? What obligations accompany them? What exposures exist? How much value remains? How can new incentives be captured? The answers can strongly impact deal economics, from reducing upfront costs to improving projected returns.
State and local governments offer various incentives to attract investment, modernize operations, enhance technological development, and create high‑quality jobs. These are the same activities that drive many PE value‑creation strategies. When aligned with transaction planning, these programs can reduce capital costs, improve cash flow, support workforce growth, and boost returns. Incentive due diligence should therefore be treated as a core transaction workstream.
In competitive projects, well-structured incentive packages can:
- Reduce project costs
- Shorten payback periods
- Improve internal rate of return (IRR)
- Support board-level approvals
This analysis is increasingly relevant as many states expand efforts to attract advanced manufacturing, technology investment, and high-wage jobs. Investors who recognize this dynamic gain an upper hand against competitors.
However, executing an incentive strategy soon after a new acquisition invites challenges. Timing is critical. Once a company commits to a location or begins deploying capital, negotiating leverage evaporates. Evaluating incentives early preserves flexibility, improves capital allocation decisions, and allows companies to compare jurisdictions before making commitments. State programs vary widely, with each incentive presenting unique legal structures, negotiation dynamics, and compliance obligations. Incentives should be integrated into transaction planning from the outset.
Incentives are one important component of a broader state and local tax strategy. Companies that evaluate both compliance risks and value-creation opportunities before a transaction are better positioned to protect and enhance value, improve returns, and achieve broader strategic goals.
Property taxes
Property tax due diligence is typically viewed as a risk-mitigation exercise: buyers want to understand whether a transaction could trigger a reassessment that materially increases property taxes post-close. Because property taxes are generally a major operating expense, a sudden increase can reduce cash flow and deal value.
Yet property taxes can also be an overlooked post-close value lever. When real estate is involved, engaging a property tax professional at acquisition can uncover current and long-term cost savings. These savings shorten payback periods and improve IRR by preventing overassessment and by developing a defensible strategy for managing post-close property tax assessments.
Value is also unlocked through targeted transaction-specific services, such as purchase price allocations prepared for property tax appeal and transfer tax declaration. These are further supported by property tax planning, consulting, and strategy designed for post-close execution.
Historical and transaction-based property tax assessments often include business assets that are not taxable as real estate. Identifying and excluding these assets can reduce transfer and ongoing property taxes – a nationally recognized Sikich specialty.
Rather than suffering a post-close surprise, property tax due diligence creates value at closing. It establishes defensible purchase price allocations and a strategy for future assessments. Understanding where taxable real estate ends and non-taxable business value begins is an important part of that analysis.
What’s next
Traditional tax due diligence emphasizes risk identification and compliance, but this narrow focus can overlook opportunities to enhance deal value and accelerate returns. By opening the diligence scope to include local site selection incentives and property tax assessments, investors can uncover embedded value drivers that meaningfully reduce costs and shorten payback periods.
The most value comes from addressing these opportunities early in the transaction process, when investors have the most opportunity to model scenarios, negotiate incentives, and execute a successful transaction. These opportunities represent just a portion of the broader tax considerations that can influence transaction value throughout the deal life cycle.
Our eBook explores these topics in greater depth, along with additional SALT and property tax strategies. Download your copy to discover the complete insights and identify opportunities to maximize value.
About our authors
Brian Forsberg, CPA, has been working in business taxation services since 2013, advising closely held businesses across wide-ranging industries, including technology, professional services, manufacturing, and retail. He specializes in C corporation taxation, income tax accounting, and multistate tax matters. Brian takes pride in developing a deep understanding of each client’s complete business operations. He can then clearly explain the tax implications of strategic decisions and identify practical solutions that align business objectives with an effective and sustainable tax strategy. Brian.forsberg@sikich.com
Jenny Walters, CRE, serves as National Director of Site Selection & Incentives, advising companies on location strategy, economic development incentives, and business expansion initiatives nationwide. She specializes in helping organizations evaluate competing locations, negotiate state and local incentive packages, and manage incentive compliance from project inception through realization. Jenny works with businesses ranging from emerging companies to Fortune 500 organizations, helping clients make informed location decisions that support long-term operational and financial success. Jenny.walters@sikich.com
Mary O’Connor, ASA, CRE, CMI, CFE, manages Sikich’s Forensics and Valuation Services. She specializes in appraising non-taxable assets for litigation and corporate transactions, particularly regarding property tax. She has provided consulting and expert witness testimony in federal, state and local jurisdictions for wide-ranging and complex property tax cases. Mary.oconnor@sikich.com
This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. In addition, this publication may contain certain content generated by an artificial intelligence (AI) language model. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.
