How do you take into account NOLs in an M&A deal?

You apply Section 382 to determine how much of the seller’s NOLs are usable each year.

Allowable NOLs = Equity Purchase Price * Highest of Past 3 Months’ Adjusted Long Term Rates

So if our equity purchase price were $1 billion and the highest adjusted long-term rate were 5%, then we could use $1 billion * 5% = $50 million of NOLs each year.

If the seller had $250 million in NOLs, then the combined company could use $50 million of them each year for 5 years to offset its taxable income.

You can look at long-term rates right here: http://pmstax.com/afr/exemptAFR.shtml