Here’s what a survey of 500 American companies with sales of at least $500 million by EY found:
- 42 percent of respondents intend to use their tax savings on acquisitions
- 73 percent of executives said that they will accelerate their M.&A. planning for the year in any case
- 69 percent of respondents say that they’re likely to bring back more cash from overseas under the new tax code
The responses to survey suggest that many of the predictions for how companies would use the proceeds from the tax overhaul may prove correct. Though many firms garnered headlines for doling out bonuses to employees or raising hourly wages, analysts and economists largely predicted that corporate America would turn to deal-making, dividends or share buybacks as ways to spend their money.
“At the end of the day, tax is not a driver of M.&A., but it certainly is a key element,” Bill Casey, EY’s Americas vice chair of transaction advisory services, told me. He added that the removal of uncertainty about taxes, as well as the potential benefits from the overhaul, appears to have lifted companies’ deal-making spirits.
Not that M.&A. has been bad so far this year. Announced transactions in the United States for the year to date are up 55 percent from the same time last year, according to Thomson Reuters. And Mr. Casey pointed out that companies already have access to plenty of cheap financing to pursue acquisitions.
But for mid-market companies especially, extra money in the pocket can help provide an extra shot of confidence.
“There’s more capital being fueled by tax reform, and that will ultimately lead to a better deal market,” Mr. Casey said.
Other findings from the survey
- 75 percent of respondents said that they are likely to grow their United States manufacturing base in some way
- 89 percent said that they planned to “enhance compensation” because of forthcoming tax benefits
- 38 percent of mid-cap companies plan to create new jobs, compared to only 19 percent of large-caps
- 66 percent are likely to pass some tax savings onto customers
— Michael de la Merced
The research was sponsored by Ernst & Young LLP and conducted by Wakefield Research. For help with your market research and opinion survey needs, contact Wakefield Research today.