Wednesday, November 7, 2012
Hey deal lawyers! Are you fired up and ready to go? Better be. In an interview in Fortune, Bill Lawlor at Dechert thinks it's going to be busy between now and the end of the year now that the election is behind us:
FORTUNE: What do yesterday's election results mean for the M&A markets?
BILL LAWLOR: If Romney had won there would have been an unleashing of animal spirits in M&A that we haven't seen since the Reagan years. But, now that we know its Obama, we expect to see a steadier, flatter arc to increased M&A activity.
Let's break that out a bit. Are you expecting significantly increased in the final weeks of 2012?
Yes, our phones are ringing off the hook. The reason is the expiration of the Bush tax cuts which are, at the margins, pushing deals to get done this year because of expected capital gains tax increases. Not just M&A, but also a rash of dividend recapitalizations in which companies are using cheap debt to borrow and issue massive dividends under the 15% capital gains rates that are now in effect.
Are those dividend recaps mostly coming from private equity-owned companies?
Yes, it's mostly in financial sponsor deals at this point -- essentially firms that have decided not to sell right now because the differential in capital gains isn't enough to get a deal done, but who still want to take advantage of the current rates. To be honest, I'm surprised we didn't see more of these over the past couple of years, since cheap debt has been around for a while. We've also got a couple in the hopper involving widely-held public companies.
OK. Nothing but dividend recaps and acquisitions between now and the end of the year. We'll see.