adplus-dvertising
Connect with us

Investment

Analysis: U.S. investment bankers' new pitch – Biden's tax hike – The Journal Pioneer

Published

 on


By Joshua Franklin and Chibuike Oguh

(Reuters) – Investment bankers keen to win lucrative assignments have a new pitch for U.S. corporate owners: hire us to sell your company now or pay at least twice as much in taxes if Democratic presidential candidate Joe Biden has his way.

Biden has proposed raising the capital gains tax rate from 20% to 39.6% for those making over $1 million. He would also increase the corporate income tax rate from 21% to 28%.

300x250x1

Biden would have to win the presidency and his Democratic Party would have to gain control of the Senate and keep control of the House of Representatives in the Nov. 3 election for his tax proposals to become law. While far from certain, this prospect has been seized on by bankers hungry for new business.

“We urge all of our current and potential clients to take note of the potential forthcoming changes, along with their associated consequences, as they consider an exit strategy for their business in the near future,” Houlihan Lokey Inc bankers wrote in a note earlier this month.

The Biden campaign did not immediately respond to a request for comment.

The investment bankers’ pitch is geared toward individuals and families, as well as private equity firms, who control companies and can decide when to sell them. It also targets company founders, who may only sell one business in their lifetime, making it the most important transaction of their lives.

The strategy appears to be working. Sales of privately held U.S. companies totaled a record $253 billion in the third quarter, up fivefold from the second quarter and up 51% from the third quarter of 2019, according to financial data provider Dealogic. This is despite the COVID-19 pandemic suppressing corporate valuations in some sectors.

(Graphic: https://graphics.reuters.com/USA-ELECTION/BANKERS-BIDEN/ygdvzndadvw/)

“Since the summer we have seen a lot of dialogue from family offices about exploring a sale of some assets. Many of these investors are sophisticated about how they handle their affairs from a tax perspective,” said David Perdue, a partner in investment bank PJT Partners Inc’s strategic advisory group.

One of the U.S. companies pursuing a deal because of tax considerations is Asplundh Tree Expert LLC, a family-controlled tree-trimming firm, according to people familiar with the deliberations.

The family that has owned Asplundh since 1928 has been keen to hold onto the company and resisted overtures to sell to private equity firms hungry for a quick flip. When one of these firms, CVC Capital Partners Ltd, convinced the Asplundh family to sell it a minority stake in 2017, it had to use a buyout fund it manages that is dedicated to retaining holdings for a decade or more, rather than cashing out after a few years.

Now the Asplundh family is working with investment bankers to cash out on part of its stake, partly because of its concerns about upcoming changes in the tax system, one of the sources said. It is seeking a valuation for Asplundh of as much as $10 billion, according to the sources. Asplundh did not respond to a request for comment.

Even if Biden wins and implements his tax plan, corporate owners may still have time to cash out. Most of President Donald Trump’s corporate tax cuts, which were enacted into law in 2017, became effective in 2018, a year after he came into office.

Still, the big uptick in the divestitures of privately owned companies shows how some of their owners view Biden’s election victory, and subsequent tax changes, as likely.

BEST PRICE VERSUS TAX SAVINGS

Goldman Sachs Group Inc advised on more sales of privately held U.S. companies year-to-date than any other, followed by Morgan Stanley , JPMorgan Chase & Co and Bank of America Corp , according to Dealogic.

To be sure, getting the best price is still the overriding consideration for corporate sellers, rather than saving on taxes, investment bankers said. Private equity firms, in particular, are wary of being criticized by investors if they think they sold a company for the tax benefit of buyout fund managers, rather than getting the best price.

“There is a tax consideration and there is a more strategic consideration. The tax consideration only applies if you are ready to sell and could attain attractive valuation multiples that could lead to a successful sale,” said Solon Kentas, co-head of M&A for the Americas at UBS Group AG

(Reporting by Joshua Franklin and Chibuike Oguh in New York; Editing by Greg Roumeliotis and Lisa Shumaker)

Let’s block ads! (Why?)

728x90x4

Source link

Continue Reading

Investment

Businesses want outstanding ‘green’ investment tax credits fast-tracked

Published

 on

TORONTO — A survey by KPMG in Canada says business leaders want Ottawa to fast-track all outstanding “green” or “clean” economy business investment tax credits.

The online survey of 534 small- and medium-sized businesses done in February says 90 per cent of those questioned supported speeding up the delivery of the promised incentives.

KPMG’s Lucy Iacovelli says meeting the climate challenges and retooling the economy requires significant business investment to decarbonize and build the net-zero industries and technologies.

To deliver, Iacovelli says Ottawa needs to make it fast and easy for companies to access the clean energy investment tax credits or they risk falling further behind U.S. and other major economies.

300x250x1

The survey found 83 per cent of the businesses say they require more assistance and incentives to decarbonize.

Eighty per cent of those surveyed also supported federal green-related investments or incentives to attract foreign companies to locate in Canada.

Adblock test (Why?)

728x90x4

Source link

Continue Reading

Investment

Four of investors’ top 5 favorite investment destinations are in Europe, Milken Institute report shows

Published

 on

Traders work on the floor of the New York Stock Exchange (NYSE) in New York.

Four of investors’ top five favorite destinations are in Europe, according to the Milken Institute’s Global Opportunity Index (GOI) report.

Denmark topped this year’s rankings, scoring first on business perception, a measure of the ease of doing business in a country as well as other regulatory metrics.

The index factors in 100 indicators under five categories: business perception, economic fundamentals, financial services, institutional framework, and international standards and policy.

300x250x1

Denmark ranked third on economic fundamentals which capture macroeconomic performance, workforce talent, and “efforts to create a resilient and sustainable economy and society,” according to the report.

These are the top five countries that investors find attractive, according to the latest GOI report:

  1. Denmark
  2. Sweden
  3. Finland
  4. United States
  5. United Kingdom

The U.S. moved up one spot to the fourth position this year, ranking highest in the institutional framework category, which tracks the protection a country’s institutions offer to investors’ rights and their assets.

The country ranked fifth in the financial services category, which evaluates the overall financial system in a nation as well as the accessibility to finance.

Finland which placed third overall, was ranked highest in the international standards and policy category that evaluates economic openness and the extent to which a country’s policies are aligned with global regulatory and intellectual property protection standards.

Emerging and developing Asia performed well compared to other E&D regions, drawing more than half (53.2%) of the funds flowing into E&D countries between 2018 and 2022, according to the report.

“While advanced economies provide stability, investors seeking high-growth returns continue to show interest in emerging and developing economies,” Maggie Switek, Senior Director of the research department at The Milken Institute, said in a statement.

Among Asian E&D economies, Malaysia emerged as investors’ favorite and ranked 27th globally.

It has the “best investment conditions” among all E&D economies, and ranks well on institutional frameworks, partially due to the fact that the country “has very strong investors’ rights,” Switek said.

Malaysia is also now the sixth largest chip exporter in the world and packages 23% of all U.S. chips, according to The New York Times.

Overall, E&D regions “offer attractive opportunities to investors interested in emerging markets with favorable growth potential,” the report said.

Rising tensions between the U.S. and China, however, have hit inflows to Asian E&D economies, down 75.4% in 2022, the report added.

The world’s second-largest economy, China, came in at 39th place. “That’s actually pretty high,” Switek told CNBC’s Squawk Box Asia, adding it is still an emerging and developing Asian economy according to the IMF.

“While China attracted more than half of total capital inflows to E&D Asia between 2018 and 2022, its appeal to investors appears to have decreased recently, likely due to rising geopolitical tensions with the US,” the report said.

Here are the top 10 E&D Asian countries on the Global Opportunity Index:

  1. Malaysia
  2. Thailand
  3. China
  4. Indonesia
  5. Vietnam
  6. India
  7. Mongolia
  8. Sri Lanka
  9. Philippines
  10. Cambodia

Singapore topped Asia as investors’ favorite country in the region, and grabbed the 14th place globally. Hong Kong and Japan ranked 15th and 16th, respectively, in Asia.

Adblock test (Why?)

728x90x4

Source link

Continue Reading

Investment

A Once-in-a-Generation Investment Opportunity: 1 Artificial Intelligence (AI) Growth Stock to Buy Now and Hold Forever

Published

 on

There’s no denying the continuing buzz surrounding artificial intelligence (AI). The technology first attracted public interest early last year for its ability to create original content and automate a growing number of time-consuming and mundane tasks, thereby making workers more productive.

In the company’s 2023 shareholder letter, Microsoft (NASDAQ: MSFT) CEO Satya Nadella addressed this paradigm shift, saying, “This next generation of AI will reshape every software category and every business, including our own.”

While that might sound like hyperbole, there’s a growing body of evidence that suggests that the process has already begun. And while estimates vary wildly, the potential economic impact is eye-opening. Generative AI could be worth between $2.6 trillion and $4.4 trillion annually, according to global management consulting firm McKinsey & Company. Companies at the leading edge of this trend will participate in this potential windfall, as will their shareholders.

Interestingly enough, Microsoft is one such company already innovating in the era of AI.

300x250x1
A hologram with various AI icons in a display above a laptop while a person types.
Image source: Getty Images.

Microsoft is my Copilot

AI has been around for decades, but the abilities of generative AI take that up a notch. The most in-demand use cases (right now) include outlining data; creating original images, text, and music; summarizing and drafting email responses; creating presentations with a few prompts; and drafting and debugging computer code. And new and intriguing use cases continue to join the fold.

Microsoft jump-started its creation of generative AI tools with a strategic partnership and stake in ChatGPT creator OpenAI, a move that now seems prescient. Microsoft quickly found ways to integrate AI across a broad cross-section of its most widely used products, making them even more useful.

The crown jewel of these efforts is Copilot, Microsoft’s AI-powered helper. What some investors may not realize is that Copilot isn’t just one, but a growing suite of job-specific digital assistants that are automating an increasing number of menial tasks. The flagship version, Copilot for Microsoft 365, helps users of the company’s productivity software become even more effective.

Last month, Microsoft released Copilot for Service and Copilot for Sales, offering “role-specific insights and actions to streamline business processes, automate repetitive tasks, and unlock creativity.” The company was quick to point out that these versions also integrate with the most widely used contact center and customer relationship management (CRM) systems, including ServiceNow and Salesforce.

The company is currently testing Copilot for Finance, which helps review financial transactions and data for irregularities, create financial reports from the data, and use the information to generate presentations.

The initial evidence suggests this strategy has been wildly successful. A survey of early users found:

  • 70% of Copilot users admitted to being more productive.
  • 68% said their work quality improved.
  • 64% spent less time dealing with email.
  • 85% reported faster first drafts.
  • 75% said Copilot helped them find digital files faster.

Perhaps most telling was that 77% of respondents said once they started using Copilot, they didn’t want to stop.

The evidence suggests that Microsoft has only just begun to unleash the vast potential of its AI-powered assistant, which could potentially generate billions of dollars in incremental revenue. Just last week, Evercore ISI analyst Kirk Materne updated his estimates, suggesting Microsoft’s generative AI efforts could produce incremental revenue of $143 billion by 2027. For context, Microsoft had total revenue of $212 billion in fiscal 2023 (ended Jun. 30, 2023), suggesting a potential revenue boost of as much as 67% over four years.

To be clear, plenty would have to go right for Microsoft to achieve this lofty benchmark, but it helps illustrate the magnitude of the opportunity.

Grabbing cloud market share

Recent results suggest that AI is also having a halo effect on Microsoft Azure, the company’s cloud infrastructure business.

In its fiscal 2024 second quarter (ended Dec. 31, 2023), Microsoft revealed that cloud services revenue climbed 30% year over year — faster than both Alphabet‘s Google Cloud and Amazon Web Services (AWS), which grew 26% and 13%, respectively. Microsoft revealed that six percentage points of that growth was driven by demand for AI services. That was up from 29% growth in the previous quarter, which got a three percentage point-boost from AI.

This suggests that not only is Copilot a runaway hit, but it’s also luring customers to Microsoft’s cloud platform

A compelling opportunity

Microsoft stock has jumped 74% since the beginning of last year, more than double the gains of the S&P 500. That isn’t an anomaly either, as the stock has surged 985% over the past decade, far outpacing the 177% gains of the broader market.

Despite its distinguished track record, Microsoft stock is still relatively inexpensive, selling 35 times forward earnings and 11 times next year’s sales. While that represents a slight premium to the overall market, the magnitude of the opportunity represented by cloud computing, AI, and Copilot shows why Microsoft is worthy of a premium.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for two decades, Motley Fool Stock Advisor, has more than tripled the market.*

They just revealed what they believe are the 10 best stocks for investors to buy right now… and Microsoft made the list — but there are 9 other stocks you may be overlooking.

See the 10 stocks

*Stock Advisor returns as of March 11, 2024

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Danny Vena has positions in Alphabet, Amazon, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, Salesforce, and ServiceNow. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

 

728x90x4

Source link

Continue Reading

Trending