Continued Economic Uncertainty Clouds Outlook for Global M&A Activity
Year-on-year global merger and acquisition (M&A) activity is on the increase but continues to be inhibited by pressures from the global economy, according to the tax advisory group Taxand, which says that with a large disparity in M&A activity levels the outlook is mixed.
Taxand reports that the number of deals in the eurozone has fallen as countries across this region continue to struggle in the economic climate. Deal volume also slowed down in the Asia-Pacific region although this follows high activity and the region is seen by many as a growth area. M&A activity in the Americas has increased, thanks to several mega deals and more attractive financing conditions.
Dealmakers are gaining in confidence and the firm detects cautious optimism for the future: businesses with planned investments held off during the recession are now sitting on large cash piles. Early signs of an uptick in M&A activity are on the horizon as these businesses seek out better returns with more favourable interest rates. M&A debt financing, tax efficient supply chain planning and new regimes for intellectual property can help stimulate further activity.
“Despite on-going economic uncertainties there are opportunities for M&A: add-on acquisitions and spin-off transactions are proving profitable,” said Ian Fleming, Taxand’s global M&A tax Leader. “Confidence in the boardroom is building. Businesses are being less risk-averse. And while some countries are focused on filling their budget deficit, reducing/eliminating tax relief or imposing other restrictions, a number of jurisdictions are encouraging inward investment by changing legislation around corporate tax rates or introducing new incentives.
“Every merger and acquisition has tax implications. Many create tax opportunities that can get overlooked in the rush to get the deal done. With careful planning multinationals can maintain a tax advantage throughout the lifecycle of your investments.”