Tax reform expected to affect M&A deals
The new tax law is anticipated to have a big impact on mergers and acquisitions, according to a new survey by Deloitte.
The firm recently polled more than 1,800 tax and M&A professionals about the impact the new tax law will have on deal making. It found that only 14.1 percent of M&A professionals believe tax law changes will not increase deal valuations and multiples. In contrast, 38 percent of the respondents predicted tax law changes will increase valuations and multiples, while another 39.2 percent are still analyzing how the new tax law will impact valuations and multiples.
Of the many changes in the new tax law, 35.7 percent of tax professionals and 40.3 percent of the M&A professionals polled said tax rate reduction would have the greatest impact on their organizations’ M&A strategies.
Nearly half of M&A professionals (44.6 percent) and more than one-third of the tax professionals polled (36.1 percent) indicated the new tax law would change the way their organization raises capital. Among the changes they anticipate, pursuing alternative capital was the leading response for both M&A professionals (20 percent) and tax professionals (16.4 percent).
The Tax Cuts and Jobs Act, which Congress passed last December, included extensive changes to the tax code. It lowered the top tax rate for corporations from 35 to 21 percent, and included provisions aimed at encouraging multinational companies to repatriate their foreign profits to the U.S.