HIGHLIGHTS
- Attained significant savings by helping the client navigate additional taxes
- Secured the deal and mitigated additional challenges by advising the client through an F-reorganization
BACKGROUND
International Farming Corporation (I.F.) is a global food sourcing solutions platform. Through innovative agtech, asset management and strategic partnerships, I.F. empowers food buyers and farmers to build a more transparent food economy.
With agricultural roots dating back to 1827, I.F. brings a deep understanding and respect for farming and the land to its investment strategy. Connecting people to life’s simple joys through the gifts of Mother Nature, The Peach Truck sells freshly picked peaches and fruit directly to consumers. The company works with growers who embrace sustainable, environmentally friendly farming techniques and ships out fruit the same day it is picked.
GHJ’S APPROACH
In its acquisition of The Peach Truck, I.F. faced several unique challenges. Very familiar with its business needs, GHJ’s Transaction Advisory Services Team was able to work with I.F.’s legal counsel to help the firm achieve its tax and non-tax goals.
In line with how many funds prefer to operate, I.F. wanted to achieve a tax step-up on the transaction and hold its investment in a pass-through structure, thereby avoiding an entity-level tax at the operating company level. However, the seller was located in Nashville, and they would have been liable for a significant excise tax in the State of Tennessee if the deal was structured to maintain I.F.’s desired structure. This additional tax would have been reflected in a higher sale price.
To address this risk, GHJ worked with I.F. to adjust its valuation model and presented several options that could potentially mitigate the additional expense. The client was also presented with a cost-benefit analysis that allowed them to compare options and determine the right solution for their operation.
Through the sale process, GHJ served as a close advisor and continued to develop trust with the client and the client’s legal advisors.
RESULTS
GHJ’s due diligence and structuring were key in I.F.’s successful acquisition of The Peach Truck. After the sale, GHJ worked with I.F. through both a pre-closing and a post-closing restructure that solved several challenges that remained around the deal. The client underwent an F -reorganization—a type of typically tax-free reorganizational structure that often involves a target company taxed as an S-corporation—that mitigated any ambiguity around additional taxes and resolved a non-tax employment issue at the same time.
“The food industry is constantly evolving- strong partnerships and trusted advisors are key. On three occasions now, GHJ has played an integral role in our success,” said Martin Vogel, I.F. Partner.
