Cash of US non-financial companies has reached $1.9 trillion, a 10 percent increase from 2016, and it is estimated that $1.1 trillion will return to the US if a tax holiday is granted under the Trump administration. Alexander Lee, a leading Tax Attorney and Partner at McDermott Will & Emery, recently commented on this topic in our webinar “Tax Considerations in M&A.” Here’s his take:
“If they do lower the corporate tax rate, a lot of foreign cash will be brought back to the US. Many companies that have been unable to tap into their international cash without facing high taxes will become flush with cash which will spark M&A activity. Any tax cut will typically encourage M&A for both buyers and sellers. There are many sellers who don’t want to pay taxes, but if the tax rate is lowered, they may be amenable to doing deals, even taxable transactions. If there is some tax reform in the form of a tax cut or repatriation, it will lead to significantly more M&A activity.”
If tax reform occurs there will be a lot of exciting transactions to look out for. Top cash hoarders such as Apple, Microsoft, Alphabet (Google’s parent company), Cisco, and Oracle may be eager to put their money to work by doing deals.