Sponsors circle medical device services provider NAMSA

Happy Friday!

A reminder to get your Deal of the Year nominations in by deadline of Feb. 10, 2020. But the sooner the better. I received the first submission this week. Starting Feb. 10, the edit team members will be sequestered in a dark, smoky back room to embark on the painstaking process of sifting through submissions to choose winners in each category.

Remember, submissions can go directly to me at cwitkowsky@buyoutsinsider.com. Go here for more information about the rules and past winners.

Big deal: NAMSA, whose various services accelerate the development of medical devices from pre-clinical phases through commercialization, is in a sponsor-fueled sales process, Sarah Pringle writes on PE Hub. Management meetings are wrapping up this week, Sarah writes.

The process has narrowed to around five to seven private equity groups, though the company was approached by strategic parties as well. Check out the story here.

Carry: Here’s an interesting strategy GPs are using to avoid taking a big hit on carried interest on short-term investments.

Some GPs are building flexibility in partnership agreements to waive performance fees on deals they sell after less than three-year holds to avoid taking a bigger tax hit, sources told Buyouts.

Instead, they are able to push such fees, known as carried interest, to subsequent investments in a fund that are exited after the three-year threshold, which are subject to a lower tax rate, the sources said.

The strategy is a reaction to the 2017 tax reform, which included provisions that charge an ordinary income tax rate on carry generated from investments held for under three years. Ordinary income tax rates can be as high as 37 percent. Performance fees on investments held for three years or longer get charged as long-term capital gains, at a rate of 20 percent.

Under this strategy, limited partners would get 100 percent of the proceeds from deals subject to the higher tax rate, while GPs would collect nothing, sources said. In subsequent deal, the GP would have the right to collect a disproportionate amount of carry to catch up to what it was owed from the waived carry.

Check out my story here. Have you seen this or are you doing this? Let’s chat. Reach me at cwitkowsky@buyoutsinsider.com.

Top Scoops
New York State Common Retirement Fund made $525 million in private equity commitments in November, writes Justin Mitchell. Check it out here.

Ohio Police & Fire Pension Fund has $92 million to $142 million to spend on private equity this year, writes Teddy Grant on Buyouts. Read it here.

Have a great weekend! Reach me with tips n’ gossip, trends, feedback, The Drama, book recommendations or whatever at cwitkowsky@buyoutsinsider.com, on Twitter or find me on LinkedIn.