Martin Falbisoner [CC BY-SA 3.0], via Wikimedia Commons
Impact of 2018 U.S. Tax Law on M&A and the New Economy
By Global PMI Partners USA Partner, Stefan Hofmeyer
2018 is upon us. The recent passage of new U.S. tax law has coalesced several topics I have been tracking. Although my focus is narrow on how new tax law will affect our world in 2018, I thought I’d share my thoughts.
Impact on Mergers and Acquisitions
Much of the discussion about the new tax law has been on how the law will stimulate the economy and raise wages. In my view as an M&A integration consultant, I see a waive of new mergers and acquisitions emerging as companies seek to leverage their capital more easily and owners see tax advantages of selling in 2018. From CNBC, in a recent poll last summer by Merrill Lynch Global Research, executive respondents indicated what they’d do after a “tax holiday”:
- Pay down corporate debt: 65%
- Stock buybacks: 46%
- Mergers & Acquisitions: 42%
- Capital expenditures (hiring/expansion) 35%
In our work as M&A integration consultants, there is a good chance we’ll see a greater number of corporate roll-ups and private equity investments in 2018.
Impact on our New Economy and On-Demand Employment
I also expect to see a spike in highly skilled labor available for on-demand employment as individuals move from corporate salaried environments to on-demand pass through work. Although there are limits on the tax break for professional service pass through entities, a significant incentive still exists to take a plunge into independent consulting work vs being a full time employee. To learn more, visit Forbes December 22nd article: What Tax Reform Means For Small Businesses & Pass-Through Entities.
As an example at Global PMI Partners, we are a business comprised of M&A integration experts that leverage concepts of an on-demand workforce to best meet the needs of our clients. We expect to see a greater amount of talent working through their own pass through entities, and through Global PMI Partners, to service clients in an on-demand economy.
This is a great time for organizations to assess their engaged consulting resources. In the emerging on-demand model I foresee taking hold, there should be less need for companies to engage consultants full time for six months to a year. Part-time, on-demand approaches for consultants will rule the day in 2018 and beyond.
How will these changing times impact you? If you are an executive looking to acquire firms in 2018, contact us. If you are a high skilled consultant looking to leverage your M&A integration expertise to take advantage of on-demand work, join us.
Are you currently part of an on-demand workforce (from being a board member to an Uber driver)? I’d love to hear from you. Take part in my On-Demand You Survey that I am developing for a book to be published in 2018. I’d value your feedback, plus you’ll have a chance at getting mentioned in the book.
What are your thoughts on the impact of 2018 U.S. tax law on M&A and the new economy? Comment and “Like” this post on LinkedIn by clicking here.
About Global PMI Partners
Global PMI Partners is the only global consultancy firm focused exclusively on merger integration and carve-out services. With offices across the US, Europe and Asia, Global PMI supports both private equity as well as corporate acquirers.