Company: LGN
Filing Date: 2025-09-02
Form Type: S-1/A
Source: 0001193125-25-193346
Chunk: 85

Company: Legence Corp.
Filing Date: 2025-09-02
Form: S-1/A
Chunk 85
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 respect of the tax benefits that are subject to the Tax Receivable Agreement. In these situations, our obligations under the
Tax Receivable Agreement could have a substantial negative impact on our liquidity.

Our ability to generate net taxable income is subject
to substantial uncertainty. Accordingly, as a result of the assumptions, the required lump-sum payment may be significantly in advance of, and could materially exceed, the realized future tax benefits to which
the payment relates. This payment obligation could (i) make us a less attractive target for an acquisition, particularly in the case of an acquirer that cannot use some or all of the tax benefits that are the subject of the Tax Receivable
Agreement and (ii) result in holders of our Class A

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Common Stock receiving substantially less consideration in connection with a change of control transaction than they would receive in the absence of such obligation. Accordingly, the TRA
Members’ interests may conflict with those of the holders of our Class A Common Stock.

If the Tax Receivable Agreement
terminates early at our election, as a result of our breach or upon a change of control (as defined under the Tax Receivable Agreement, which includes certain mergers, asset sales and other forms of business combinations and certain changes to the
composition of the Legence board of directors), we could be required to make payments under the Tax Receivable Agreement that exceed our actual cash tax savings under the Tax Receivable Agreement. Consequently, our obligations under the Tax
Receivable Agreement could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control. For
example, assuming no material changes in the relevant tax law, we expect that if we experienced a change of control or the Tax Receivable Agreement were terminated immediately after this offering, the estimated
lump-sum payment to the TRA Members would be approximately $250 million (calculated using a discount rate equal to a per annum rate of 536 basis points, applied against an undiscounted liability of
approximately $374 million). There can be no assurance that we will be able to finance our obligations under the Tax Receivable Agreement. We may need to cause Legence Holdings to incur debt and make distributions to the holders of LGN Units,
including us and the Pubco Subsidiaries, to finance payments under the Tax Receivable Agreement to the extent our cash resources are insufficient to meet our obligations under the Tax Receivable Agreement as