It hasn’t taken long for the business world to start unpacking the implications of the newly passed One Big Beautiful Bill Act (OBBBA). While media coverage has mostly centered on its impact on individual taxpayers and the broader economy, the legislation is likely to have meaningful consequences for M&A in particular. While the full effect on how deals are negotiated and structured will need to play out over time, the bill already offers some clear takeaways for entrepreneurs, investors and dealmakers to consider.
Asset Deals Got Even More Buyer-Friendly
One of the threshold decisions in any M&A transaction is whether to structure the deal as a sale of the target company’s stock or as an acquisition of its assets. While there are often non-tax factors that drive that conversation, the tax analysis almost always boils down to a familiar formula: Buyers prefer asset deals, sellers prefer stock deals. Sellers lean toward stock sales because they usually benefit from long-term capital gains treatment, while buyers push for asset sales which allow a buyer to “step up” the tax basis of certain acquired assets and accelerate the recovery of their investment through depreciation.
The OBBBA tilts the scales even further in favor of asset deals from a buyer’s perspective. By restoring a key provision of the 2017 Tax Cuts and Jobs Act (TCJA), buyers will now be allowed to expense 100% of qualified tangible and intangible assets through 2029. Moreover, the OBBBA also broadens the types of assets that can be expensed to include self-created intangibles (such as software and customer relationships) and doubles the Section 179 expensing cap from $1.25 million to $2.5 million (although this deduction starts to phase out for an acquirer of more than $4 million in qualifying assets in a given year).
In practical terms, a buyer’s ability to immediately expense the acquired assets can yield higher cash flows in the critical early years post-acquisition, faster return of capital and stronger after-tax ROI. In some cases, these benefits may even justify offering a higher purchase price, especially in a competitive process. By contrast, they make a stock sale even less palatable to a buyer and thus harder for a seller to justify, absent a particular non-tax reason for doing so.
Rollover Stock Got a Whole Lot More Attractive
One of the signature features of private equity M&A is the use of “rollover equity,” whereby sellers forgo a portion of their cash proceeds (usually 10%-20%) in exchange for equity in the buyer. Rollover equity is often used to reduce the buyer’s cash outlay and to align post-closing incentives, while offering sellers a way to share in the future growth of the business.
The OBBBA’s updates to the treatment of Qualified Small Business Stock (QSBS) are poised to make rollovers even more valuable and more common. QSBS refers to shares in a C Corporation that, if certain requirements are met, can allow the holder to exclude a significant portion of their capital gains upon a sale from federal tax liability.
While under the old regime, QSBS had to be held for a minimum of five years to qualify, the OBBBA provides a tiered approach, allowing for the exclusion of up to 50% of the full amount after three years and up to 75% after four. In addition, the exclusion cap was raised from $10 million to $15 million and the asset threshold raised from $50 million to $75 million, updates that will make the advantages of QSBS both more accessible and beneficial. Finally, the law adds flexibility around corporate reorganizations and rollovers, allowing sellers to retain QSBS benefits even when contributing stock into holding companies or merging into larger platforms, without restarting the holding period clock.
Rollover equity has long been a tool for bridging valuation gaps and keeping sellers invested in the business post-closing. With OBBBA’s enhanced QSBS treatment, rollovers are now even more attractive from a tax perspective and likely to become even more prevalent.
Tax Incentives May Shape Acquisition Targets
The OBBBA doesn’t only provide new rules that impact how M&A deals are structured, it provides new incentives that could impact the types of businesses that buyers want to acquire in the first place. The early winners appear to be R&D-heavy companies.
The bill restores full, immediate expensing of domestic research and development spending, reversing the TCJA’s five year amortization requirement. That means companies in sectors like AI, biotech and advanced manufacturing now look stronger on paper, with the potential for improved earnings and post-acquisition cash flow.
But the benefits go beyond R&D. As noted earlier, the enhanced deductions for qualified assets could make businesses with heavy upfront investment or strong IP portfolios more attractive acquisition targets. This shift won’t rewrite the fundamentals of what makes a business great, but it does add a new layer of strategy on both sides of the negotiation table. For buyers, these changes shift the ROI calculus and should lead many buyers to adjust their models to reflect these tax-boosted returns. For sellers, they create an opportunity to reframe historically off-putting high capex numbers as a feature, not a bug, highlighting them as a driver of long-term value creation. In M&A, timing is paramount, and right now, the tax code is giving certain companies a tailwind.
While the OBBBA didn’t set out to be an M&A bill, its impact on how deals are structured, priced and taxed is likely to be far-reaching. In a competitive M&A landscape, tax is often used as a strategic tool. Smart dealmakers have just been given some new powerful weapons to wield.
