US President Donald Trump could emerge as a ‘rainmaker’ of a new round of technology company mergers and acquisitions (M&A). ‘One of the main planks is a proposal to give corporates the ability to repatriate overseas profits at a reduced tax rate,’ explains Marcelo Ballve of venture capital research firm CB Insights.
According to reports, this could ‘open a window for US multinationals to repatriate more than $2.5trn they have parked abroad without paying the prevailing corporate tax rate of 35%,’ probably paying something much lower, perhaps 10%.
Apple's $230bn overseas cash
‘This could trickle through to increased activity in the tech M&A market, since many of the companies with massive overseas cash hoards are acquisitive tech giants,’ Ballve says.
Apple alone ‘has $230bn trapped abroad,’ according to the TechMarketView industry analysis website. ‘Given that Apple is the world’s most valuable publicly quoted company, it is a fair bet that you own a bit of it,’ says TechMarketView founder Richard Holway. ‘If not directly then via almost every fund/pension fund in the land. What happens to Apple’s share price really does affect us all.’
What’s more, proposed changes to US corporate tax rates, from 35% now to 15%, if Trump gets his way, would further oil the deal wheels, in the tech space and beyond.
Pound is down
Proposed tax cuts would benefit virtually every kind of corporate and financial entity imaginable, including VCs (venture capital), PE (private equity) shops, and hedge funds. This plan faces very opposition from Congress.
Still, with sterling down about 13% versus the dollar, even with the pound’s recent rally, UK company’s remain potentially up for sale. Obvious UK technology candidates range from niche market leaders with firm balance sheet backing and oodles of recurring revenues to well-braded businesses currently in a state of distress, perhaps from cyclical end market weakness.
UK tech in play
Financial trading platform supplier Fidessa (FDSA) or accounting software firm Sage (SGE) might fit the bill. CAD/CAM design engineering software supplier AVEVA (AVV) is another, while AIM-listed ticketing and queuing technology play Accesso (ACSO:AIM) may also become a target given its market leading reputation within its niche.
There could even be left-field surprises. Maybe Apple will change tactic about its plans to do more development inhouse, what if it does try to buy graphics chip designer Imagination Technologies (IMG) rather than start from scratch itself? As has long been speculated.
Electronics equipment designer Laird (LRD) is another important supplier for iPhones - it provides radio frequency (RF) shielding kit to the US tech giant. Plenty of other candidates could also emerge.
