Most companies think about R&D tax credits as a way to reduce taxes.

Buyers think about them very differently.

In an acquisition, R&D credits aren’t just a tax benefit — they’re a tax attribute, and tax attributes directly affect valuation, deal structure, and post-close economics.

Companies that understand this ahead of time quietly stack the deck in their favor.
Companies that don’t often find out too late.

How Buyers Actually Look at R&D Credits

During diligence, buyers aren’t asking:

“Did this company claim an R&D credit?”

They’re asking:

• Are the credits real?

• Are they defensible?

• Are they usable after the transaction?

• Do they create future value, or future risk?

That distinction matters.

A large credit number with weak support is not an asset — it’s a question mark.

R&D Credits as Tax Attributes

From a buyer’s perspective, R&D credits fall into the same bucket as:

• NOLs,

• deferred tax assets,

• and other carryforwards.

They want to know:

• how much exists,

• how long it lasts,

• and whether it survives the transaction structure.

Federal R&D credits carry forward 20 years.
Some state credits carry forward indefinitely.

That longevity makes them valuable — if they’re properly documented and transferable under the deal structure.

Where Deals Get Complicated

This is where many companies run into trouble.

1. Inconsistent Claiming Patterns

One-off or sporadic R&D claims raise questions:

• Why was it claimed this year but not others?

• Was the methodology consistent?

• Were base years handled correctly?

Inconsistency invites scrutiny.

2. Weak Documentation

Credits built on:

• title-based assumptions,

• high-level narratives,

• or retroactive estimates

often trigger deeper diligence requests — or valuation haircuts.

Buyers don’t want to inherit audit risk.

3. Unclear Ownership and Eligibility

Contractors, outsourced development, IP ownership, and supervision matter.

If the buyer can’t clearly determine who performed the R&D and who owned the results, they may discount the credit entirely.

4. State Credit Uncertainty

State credits can materially increase value — but only if:

• they’re actually usable post-close,

• and properly allocated to the correct entities.

Poor state documentation often gets ignored or excluded in deal models.

What “Stacking the Deck” Actually Looks Like

Companies that prepare early tend to do a few things differently.

They treat the R&D credit as a repeatable system, not a one-time optimization.

They:

• use consistent methodologies year over year,

• maintain clean base period calculations,

• document business components clearly,

• and align wages, activities, and experimentation narratives.

This creates a clean story that’s easy for a buyer to diligence.

And in M&A, clarity equals leverage.

Why This Shows Up in Valuation

When R&D credits are well-supported:

• buyers are more comfortable modeling future tax savings,

• diligence moves faster,

• and fewer escrows or indemnities are required.

Just as importantly, it signals something less obvious but equally valuable:

The management team understands its tax position and runs a disciplined operation.

That confidence matters — especially for strategic buyers and private equity firms.

The Cost of Waiting Too Long

Trying to “clean up” R&D credits during a transaction is risky.

Once diligence starts:

• timelines are tight,

• assumptions harden quickly,

• and buyers are less forgiving.

At that point, even valid credits can be discounted simply because they’re hard to verify under pressure.

The Real Takeaway

R&D credits don’t create deal value on their own.

Well-documented, consistently claimed, defensible R&D credits do.

Companies that think about R&D credits as part of their long-term tax architecture — not just an annual filing decision — put themselves in a stronger negotiating position when it matters most.

That’s what stacking the deck actually means.