New BlackArch Report Highlights 2012 Tax Policy and M&A Implications for Middle-Market Private Companies

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A new report by BlackArch Partners, "The Uncertain Future of U.S. Tax Policy," highlights the expectation that capital gains and ordinary income taxes will rise in 2013 and recommends that private company owners contemplating a liquidity event consider initiating a transaction in the first half of this year.

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The unsettled tax environment for owners of U.S.-domiciled businesses will be a key driver of M&A activity in 2012.

A newly published report by BlackArch Partners, a middle-market investment bank serving private company owners and financial sponsors, concludes that the unsettled tax environment for owners of U.S.-domiciled businesses will be a key driver of M&A activity in 2012.

The report, "The Uncertain Future of U.S. Tax Policy: Implications for Private Company Owners," notes that the December 2010 extension of the Bush-era tax cuts did little more than postpone by two years what likely will be higher capital gains and ordinary income tax rates for private business owners.

The report is available for download from the Library section of BlackArch's website. (The Library requires a one-time-only registration, after which you can return anytime without needing to remember a password.)

In the Report, BlackArch recommends that shareholders who are considering pursuing a liquidity event in the next 12 to 24 months consider initiating a transaction process in the first half of 2012, with the goal of benefiting from the historically low tax rates now in place and avoiding what likely will be a large backlog of transactions trying to close prior to year-end. The piece notes that the last time the M&A markets faced a similarly uncertain tax situation, in December 2010, buyers and financing sources did not have the capacity to complete all the deals that sellers were trying to close by year-end.

The Report addresses various future tax scenarios and helps quantify the potential impact different tax rates will have on sellers. The paper also addresses other key issues that BlackArch's bankers think will drive robust M&A activity in 2012.

BlackArch encourages private company shareholders who may be contemplating a transaction over the next couple of years to contact us to discuss further the implications of potential changes in tax rates as well as to assess your full range of strategic alternatives.

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Tim Whitmire
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