The Ledger
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TRAs are primarily created by private equity for their portfolio companies
“It's primarily done by private equity firms in the context of their portfolio companies, and it runs the gamut of industries from the likes of Bumble to GoDaddy all the way to Shake Shack, my personal favorite.”
The 2021-2022 IPO/SPAC boom drove a surge in VC TRAs
“As a result of the flurry of both IPOs as well as SPACs in 21 and 22, there was a significant uplift in terms of number of TRAs created that were shared by both growth equity firms as well as venture capital firms”
The TRA market opportunity grew from $7B in 2017 to $30B
“In 2017, the market opportunity was, call it, seven billion dollars on the back of euphoric equity markets, and more importantly, adoption by private equity sponsors. That number is now closer to thirty billion dollars.”
TRAs sit as unsecured obligations behind debt but ahead of equity
“It sits behind indebtedness, so it's an unsecured obligation ahead of preferred equity as well as common.”
Companies typically pay 85% of realized TRA tax savings to holders
“The company would file its corporate tax filing if and when they filed that taxes and they are able to utilize the deductions that a TRA assets are able to deliver them, they would then pay 85% of those savings to the holder of the TRA.”