A Seamless Legal Strategy for Growth and Opportunity Zone Investment

Upon request from the estate planning department, the transactional team at Shields Legal Group assisted a client in acquiring an opportunity zone company. Leveraging our expertise, we: (i) established a multi-level holding company structure compliant with opportunity zone requirements, (ii) negotiated and closed a complex acquisition, and (iii) ensured the client’s corporate and financing structures were optimized for sustained growth and expansion following the acquisition.

Introduction

Shields Legal Group maintains a diverse practice, encompassing corporate restructures, acquisitions and other transactions, estate planning, and financial matters. In this engagement, our client—active in multiple ventures through a multi-tiered corporate structure—initially sought our estate planning team’s guidance to maximize tax benefits available through its corporate framework. The client expressed a strategic interest in acquiring an opportunity zone company, specifically targeting a rapidly growing technological manufacturing business located in a financially distressed community. The client further stipulated that debt financing be utilized for the acquisition, rather than liquidating existing assets, thereby introducing additional complexity.

Problem

Once engaged, our transaction team’s focus was to confirm that the client’s portfolio structure was suitable for the addition of an opportunity zone company. This required verifying that the target business was situated within a designated opportunity zone and that the purchasing entity, along with its direct and indirect parent companies, satisfied all legal criteria. These criteria included business type, income source, asset location, allocation of intangible property, asset valuation, and compliance with prohibitions against certain business activities.

Securing financing presented further challenges. The client was resolute in its decision not to liquidate any current portfolio companies or their assets, preferring to obtain third-party financing. Despite the target’s promising growth prospects, its existing cash flow and asset models led financial institutions to hesitate in providing the necessary funding. Due to its hesitancy, the lender ultimately selected required assurance provisions to be incorporated not only into the financing documents but also into the acquisition and corporate documents of the client.

Additional complexities arose regarding the transfer of a critical Amazon contract, which was essential for the continued success of the business post-acquisition.

All of these factors contributed to extended negotiations and necessitated multiple extensions of the original closing date.

Solution

To ensure eligibility for opportunity zone recognition and benefits, the transactional and estate planning teams at Shields conducted a comprehensive analysis of the target’s operations and assets against the relevant legal criteria. This review confirmed that (i) the target’s current business and assets were in compliance at the time of the purchase, and (ii) the purchasing entity’s corporate structure would remain compliant post-closing. Subsequently, we prepared internal governing documents for the purchasing entity and its parent companies, explicitly incorporating the necessary criteria provisions.

With the corporate structure established, our team proceeded to finalize the acquisition. We led negotiations with the target and its legal counsel and facilitated the completion of financing documents in accordance with lender requirements. This process involved minor amendments to the purchasing entity’s corporate documentation, which did not materially affect the required structure. The closing process demanded close collaboration among the transaction, estate planning, and financing teams, including joint efforts in document preparation, review, and revision, as well as coordinated discussions with the target, its counsel, and the lender.

Conclusion

Through effective collaboration across the transactional, estate planning, and financing teams, Shields Legal Group enabled the client to maintain the requisite corporate structure for an opportunity zone investment and successfully complete the acquisition and financing of the target business. This outcome ensured that the client acquired a business with significant growth potential while securing the ongoing benefits associated with opportunity zone protections moving forward.

Read Part 1 of this case study series — Building a Legacy

Read Part 2 of this case study series — Financing a Strategic Acquisition