2 minute read 16 Apr 2018
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How US tax reform, infrastructure may spur corporate growth

By

Steve Krouskos

EY Global Vice Chair – Transaction Advisory Services

Driving growth and investment priorities for global EY TAS. University of Florida alumnus. Son, husband and father of four.

2 minute read 16 Apr 2018

Tax reforms may bring an upside to M&A, and governments investing in infrastructure could spur corporate growth.

Both US and non-US executives do see some potential boost to mergers and acquisitions dealmaking from the US corporate tax code reforms. However, a similar number of non-US executives are downbeat about the potential impact. The majority do not expect a material impact either way.

Taxation levels, in and of themselves, generally do not drive dealmaking. Tax is part of the calculations on valuations and future growth potential, but deals are driven by strategic objectives. Also, in today’s environment of relatively loose monetary policy, strong corporate earnings and elevated stock prices, the ability to fund deals has not been an impediment to M&A.

The majority of US executives plan to invest tax reform gains in existing operations. The provisions in the reforms that are more favorable to investing in short-lived assets may help companies that are still unsure about what technology assets to acquire. This may help US companies retain their lead in the technology sector, as well as turbocharging growth in others.

16 do you expect the recent changes corporate taxation

Q: Do you expect the recent changes in corporate taxation in the US to have an impact on global M&A?

Increasing expectations for infrastructure spending could accelerate corporate growth

The vast majority of executives across most regions expect government investment in infrastructure to increase over the next 12 months. However, fewer US respondents expect an increase compared to other regions — perhaps indicating an opportunity in the US.

The potential for infrastructure investment to have a multiplier effect on GDP growth is anticipated to be an important stimulant for corporate growth. Nearly two-thirds of executives say it will increase their growth rates.

Investment in building new digital and improving transport infrastructure is the key ask by executives. Both should help underpin similar investments being made at the corporate level.

where should government

Q: How will government spending on infrastructure impact your growth plans?

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Summary

Over the next 12 months, taxation levels, in and of themselves, generally will not drive mergers and acquisitions; however, some provisions in the US reforms may help companies that are unsure about what technology assets to acquire.

About this article

By

Steve Krouskos

EY Global Vice Chair – Transaction Advisory Services

Driving growth and investment priorities for global EY TAS. University of Florida alumnus. Son, husband and father of four.