Houston partners Don Brodsky and Robert Shearer were quoted in the June 11, 2010, Houston Business Journal article, "Taxing Decisions Boost More M&A Deals."
According to the article, anticipated changes to the tax code and an abundance of capital from the private equity market will lead to a spike in mergers and acquisitions later in the year. The cuts to the capital gains tax currently in place will expire at the end of the year, driving the tax up from 15 percent to 23.8 percent.
The volume of companies looking to finalize deals may create some congestion toward the end of the year for M&A professionals, according to Shearer. "M&A lawyers shouldn't make any big New Year's Eve plans," Shearer said.
Also affecting potential deals are the potential increases in the tax affecting carried interest, the performance-based compensation to the general partner of a private equity group or hedge fund, according to the article. "If those rates were to go up, that could affect how private equity and hedge funds structure their deals," said Brodsky. Some of those funds might convert into corporations to avoid the tax shift or others might rearrange their portfolios prior to the change, cleaning them out in a torrent of sales, Brodsky added.