US tax reforms lay the foundations for an M&A boom

We are just weeks away from knowing more of the details of the much-vaunted United States tax reform package, a central pillar of the Republican Party’s legislative program for President Trump’s first term in office.

The potential move to territoriality, as currently envisaged by the Trump administration, presents an opportunity for US businesses to return cash, currently offshore, back to the US at a lower tax rate, which in turn could fuel renewed M&A activity.

This, in particular, might be a kicker for activity in the technology and pharmaceutical arenas, both of which have powered global M&A activity in recent years, with many such businesses having significant cash pools offshore. A potential issue for these sectors, however, is the proposed global minimum tax on intangibles income of 15 per cent.

While replenished war chests and eliminating the US tax on repatriated foreign subsidiary income might fuel domestic and outbound US M&A activity, the reforms would mean that some US businesses are made more attractive and ultimately vulnerable to non-US takeover.

 

Source: City A.M.

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