How Sponsor-to-Spomsor Deal Structures Avoid Tax Blowups

In this episode of The Acquisition Talk, Lucas and Luna break down the sponsor-to-sponsor transaction — an increasingly common but poorly understood deal structure where one private equity firm sells a portfolio company directly to another. They walk through the tax, legal, and strategic mechanics that separate these deals from a traditional strategic sale or an IPO exit. Using a real-world example of a mid-market industrial roll-up that changed hands between two PE firms in early 2026, they explain how a Section 338(h)(10) election preserved roughly $40 million in tax basis for the buyer while the seller exited with a clean capital gain. They also explore the tension between speed of execution and price — sponsor-to-sponsor deals typically close in 60 to 90 days, versus 6 to 12 months for an IPO process — and why that speed premium can be worth accepting a slightly lower multiple. The hosts also look at the rise of continuation funds as an alternative to a traditional sponsor-to-sponsor sale, and why limited partners are increasingly pushing back on that structure. If you operate in private equity, investment banking, or corporate development, this episode will help you understand the trade-offs embedded in one of the most important exit routes in the middle market. #SponsorToSponsor #PrivateEquity #MergersAndAcquisitions #TaxStructures #Section338 #ContinuationFunds #MiddleMarket #ExitStrategies #BusinessSales #DealStructuring #PrivateEquityExit #TaxEfficient #IndustrialRollup #MAndA #BusinessPodcast #FexingoBusiness #AcquisitionTalk #LucasAndLuna Keep every episode free: buymeacoffee.com/fexingo