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| Don't let lapses in tax compliance put your tech or high-growth company at risk |
| PitchBook Dealmakers Column
By Pascal Van Dooren, Chief Revenue Officer, Avalara |
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Sales and use tax compliance can be a big challenge for growing companies. Unfortunately, many accounting and finance departments don't realize the litany of tax requirements that come with growth until after they’ve been exposed to risk, which can bite the company down the road.
Company executives typically don't want to take time to think about complex domestic and global tax issues, but it's important to do so. Here are just a few areas where high-growth companies have holes in their compliance:
Economic "Nexus": Online sales of more than $500,000 is reason alone to file and remit taxes in many states; employees, warehouses, and/or contractors on location are not required.
Remote employees: Adding remote staff in a new state or employing contract employees are just a few actions that create an obligation to register, file, and remit taxes in that state and in all its local jurisdictions.
Adding products/services: Adding new products or services to a SaaS company, as well as selling digital goods, can make compliance tricky. In the US, for instance, software is taxed 450 different ways across 45 categories.
The best way to remove risk in tax compliance is to offload it. Tax automation software is a reliable way to stay on top of compliance as you grow.
Click here for a handy guide from Avalara on what high-growth companies need to know about tax compliance.
This article represents the views of the author only and does not necessarily represent the views of PitchBook. |
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| | | | | | | Carlyle lines up pair of SBOs |
| The Carlyle Group has agreed to buy packaging company Novolex from Wind Point Partners and TPG in a deal that could be valued at around $2.5 billion, according to an earlier Wall Street Journal report. Novolex, a manufacturer of plastic and paper shopping bags and other various products, has been majority owned by Wind Point since 2012 and backed by TPG since 2009. Over the past four years, it has grown its revenue from $500 million to more than $2 billion.
Carlyle is no stranger to the packaging industry. In 2014, the firm paid $3.2 billion to acquire Signode Industrial Group, a provider of packaging products used during shipping. Last year, meanwhile, Carlyle portfolio company Multi Packaging Solutions (NYSE: MPSX) raised $215 million in an IPO. The new, 10-figure investment in Novolex comes from Carlyle Partners VI, a $13 billion vehicle that closed in 2013 and had about $6.8 billion in dry powder as of September 30, according to the PitchBook Platform.
In a separate deal, Carlyle has agreed to buy a majority stake in CMC Networks, a South African provider of managed connectivity solutions for telecommunications operators. The seller is Investec Equity Partners, although the firm's founder and management will invest alongside Carlyle as part of the transaction. |
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| | | | | | | IK closes Fund VIII on €1.85B |
| IK Investment Partners has closed its eighth mid-cap fund on €1.85 billion, exceeding a €1.6 billion target after just nine months of fundraising. With the close, IK joins some select company: So far, only 11 other European firms have topped the $1 billion mark on funds raised this year, according to the PitchBook Platform.
Founded in 1989, the London-based firm will use the new capital to continue a strategy of making majority investments in companies located in northern and western Europe with valuations of up to €500 million. Following a first close in August, the firm has already used the fund to make three investments: Ellab, a manufacturer of thermal validation solutions; ZytoService, a pharmaceuticals compounder; and Schock, a manufacturer of granite kitchen sinks.
The fund wrap is IK’s second of the year, following the close of IK Small Cap I Fund on €277 million in March. The firm closed its previous mid-cap vehicle on €1.4 billion in 2013. |
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| | | | | | | The 9 PE investors most active in the US Southeast |
| Align Capital Partners has teamed with company management to make an investment in Alliance Source Testing. Based in Decatur, AL, the company provides source emissions testing to energy, chemical and other industrial facilities throughout the US. The deal is the first for ACP since the firm closed its debut buyout fund earlier this year on $325 million.
As such, it’s also ACP’s first investment in the southeastern US—but other private equity investors are no strangers to the region. Last year brought a new peak of 551 transactions in the area, according to the PitchBook Platform. That includes a heavy dosage of deals in the healthcare sector—16.7% of all PE activity since the start of 2012, more than any other industry except B2B (41.7%). |
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| | | | | | | | Does competition really breed lower prices? In the world of pharmaceuticals, often not. [The Wall Street Journal]
A deep dive on Cerberus Capital Management’s quest to create Big Gun. [New York]
Steve Eisman (of “The Big Short” fame) has his eyes on the next financial crisis. [The Guardian]
An enlightening and entertaining chat with Jack Bogle, the founder of Vanguard, on what he sees as an ongoing investment revolution. [Bloomberg] |
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| Since yesterday, the PitchBook Platform added: | | 151 Deals | 3166 People | 864 Companies | 4 Funds |
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| 2008 Vintage US Venture Funds with Software Investments |
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| Deals in Play & Announcements |
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| PE-backed Arrowhead to acquire Stens |
| | Electronic Components | Jasper, IN | Add-on |
| Arrowhead Electrical Products, a portfolio company of The Riverside Company and Investcorp, has agreed to acquire Stens from equipment manufacturer Ariens. Operating under both its own name and the JThomas brand, Stens is a distributor of replacement parts—including engine components, blades and chains—to the outdoor power equipment, golf and industrial markets. Ariens had backed the business since 1995. |
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| L Catterton goes grocery shopping |
| | Department Stores | Sao Paulo, Brazil | Buyout |
| L Catterton has made a significant investment in St. Marche, a supermarket chain operating 18 locations in Brazil. The firm will pay BRL$226 million (about $67 million) to acquire a 52% stake, according to an earlier Valor Econômico report. The deal marks L Catterton's first Brazilian investment out of its Latin America Fund II. |
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| | | | | | | IVP buys Prevalent from SMC |
| | Network Management Software | Warren, NJ | Secondary Transaction |
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| BDC to invest in Vitamin Well |
| | Beverages | Stockholm, Sweden | Buyout |
| | | | | | | YFM earns 40x return on Go Outdoors sale |
| | Specialty Retail | Sheffield, UK | Corporate Acquisition |
| After 18 years of ownership, YFM Equity Partners has sold outdoor clothing and equipment retailer Go Outdoors to JD Sports Fashion (LON: JD) for about €112 million. 3i Group will also exit its stake in the company with the sale. YFM logged a €23 million total return on the deal, representing a 40x multiple on its initial investment. |
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| | | | | | | GHO Capital closes oversubscribed debut |
| | | | | | | | | Georg Stratenwerth leaves Advent |
| | Georg Stratenwerth has reportedly joined Pillarstone, a platform launched by KKR to manage European bank assets, as a non-executive director of the company’s platform in Greece. Stratenwerth had previously worked for more than a decade at Advent International, most recently working as a managing director focused on the healthcare and industrial sectors. |
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| Apollo-backed Athene primes $1B IPO |
| | Re-Insurance | Pembroke, Bermuda | IPO |
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| Tillridge Global brings in more than $300M for second fund |
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