What are the tax considerations for shareholders participating in the transaction?

Tax considerations for shareholders

Because the deal is structured as a cash‑out merger (Centerbridge is paying $2 billion in cash for all outstanding MeridianLink shares), the tax consequences for participating shareholders are relatively straightforward but still depend on the shareholder’s cost basis and holding period. For most investors the receipt of cash for their shares triggers a taxable capital‑gain event on the date of the acquisition (the “effective date” of the transaction, typically the closing date). If a shareholder held the stock for more than one year, the gain will be treated as a long‑term capital gain and taxed at the applicable long‑term rate (0 %–20 % plus any applicable state tax). Shares held for less than a year will generate a short‑term capital gain taxed at ordinary income rates. Any portion of the cash that exceeds the shareholder’s original purchase price (adjusted for splits, dividends, etc.) is taxable; if the acquisition price is lower than the cost basis, a capital loss can be claimed.

In practice, many shareholders will receive a cash‑in‑lieu of stock and may have the option to defer tax by participating in a Section 338(h)(10) election (if the buyer elects to treat the transaction as an asset purchase). However, the press release does not indicate a stock‑for‑stock component, so the default treatment is a taxable cash‑sale. Shareholders should therefore review their cost basis records (including any wash‑sale adjustments) and consult a tax advisor to determine the exact gain or loss and the timing of the tax liability. From a trading perspective, the certainty of a cash transaction and the potential for a sizable, one‑time tax hit could prompt some shareholders to sell before the deal closes to lock in a known price and manage the tax event, especially if they have high‑basis shares or are close to the long‑term holding‑period threshold. The trade‑off is between locking in a known cash return now versus the potential upside of holding through any post‑closing price drift.

Actionable insight:

- Review your basis and determine whether the expected gain will be short‑ or long‑term.

- Plan for the cash‑receipt tax event—consider using tax‑loss harvesting or charitable contributions to offset the gain.

- If you are a long‑term holder and the price is at a premium to your cost, consider taking the cash now and allocating the post‑tax proceeds into a diversified, tax‑efficient portfolio rather than risking post‑close volatility.

(Technical charts show MLNK trading near the acquisition premium; a swift price decline is typical as the deal approaches closing, so timing of the sale for tax purposes and market timing should be coordinated.)