Tax Reform Ensures Positive Outlook for Middle Market M&A

By Generational Equity


Experts are predicting an acceleration of merger and acquisition activity in 2018 thanks to the passage and implementation of the major tax reform legislation signed last year by President Trump.

A recent survey of business leaders indicates an increase in M&A transactions this year. Deloitte's "State of the Deal M&A Trends" report foresees an "increase of merger and acquisition activity in 2018 with 68 percent of corporations surveyed and 76 percent of private equity respondents anticipating an uptick in the number of transactions."

"Concerns about the size and scope of tax reform and the ability of the current administration to reduce the regulatory burden have been largely resolved," said Terry Johnson, our Chief Revenue and Strategy Officer at Generational Equity.

"With reduced taxes, large strategic buyers will have more capital available to reinvest in their growth initiatives, including acquisitions."

Wells Fargo predicts that the repatriation tax holiday will be a huge driver of merger activities as companies forgo capital spending and share buybacks in favor of growth by acquisitions.

"It is our belief that tax reform will strengthen the current seller's market," says Johnson.

"However, the window of opportunity for business owners to maximize their exit can close quickly based on geopolitical events, a slowdown in the economy, or other factors, all of which are largely out of our control."

"Seller's markets don't last forever," says Johnson. "With literally trillions of dollars coming into the market in terms of tax breaks and tax repatriation programs, it is prudent for business owners to recognize this and consider the opportunities in the marketplace now."

Timing an exit strategy to coincide with ideal market conditions is essential in securing the maximum value when selling a business. The acceleration of M&A activity as a result of this tax reform legislation will open opportunities for middle market business owners to exit on the right foot.

But, these conditions won’t last forever. If you want to make a start on your exit journey while the market is strong, join us for an executive M&A conference.

These are completely complimentary and take place throughout North America. In just a few hours, you’ll receive a valuable insight into the inner workings of mergers and acquisitions, and discover what business buyers are looking for.