The benefits of the U.S. 2017 tax reform act (the Act) should be broadly felt by Americans, and businesses large and small will see tax relief. The Act contains elements important for stronger economic growth—a competitive corporate tax rate and a move toward a territorial system of international taxation. At the same time, the House and Senate tax-writing committees have indicated that there may be a need to consider technical corrections or more substantive changes to the Act.
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Operational improvements are a key lever for achieving value creation after a deal closes. There are three critical ways private equity firms can both protect and grow value through operations.
Industry 4.0—synonymous with smart technologies—is driving efficiencies and increasing productivity. Data, and the physical-digital integration of humans, processes, systems, and machines, are key components of this transformation. The global ramifications of Industry 4.0 are still under debate, but one thing is certain: Change is coming.
Artificial intelligence (AI) is advancing quickly, and it’s impossible for anyone to give a precise vision of how the next ten—much less five—years will unfold. Our aim here is different: to make specific predictions about AI trends for the next 12 months and draw out key implications for business, government, and society as a whole.
The future. It’s the topic on the mind of most business leaders—what’s going to happen in the future? And importantly, how do you ensure you’re prepared for it? Today, as technological advances impact the scale, scope, and utility of data and information, a new ecosystem of information and trust is taking shape around us. Businesses are responding by using and reporting information that goes beyond financial information.
Detailed analyses and quantitative rigor go into every sound investment decision. To make matters more challenging, we are constantly battling our instincts, which can pull us in conflicting directions and get in the way of sound investment discipline.
The Tax Cuts and Jobs Act (TCJA) is here to stay and its provisions change the landscape of the private equity world going forward. The decrease in corporate rates coupled with new net operating loss limitations, corporate alternative minimum tax repeal, and accelerated expenditures will directly impact how the value and price modeling of deals are calculated. When all of the TCJA provisions roll out, deal teams will have many additional tax attribute facets to consider when acquiring or exiting an investment.
Under prior law, the Internal Revenue Code provided that employers would be allowed deductions for operating privately owned aircraft attributable to business flights. Under the new law, though, expenses attributable to entertainment activities will now be 100 percent non-deductible, whereas in the past they were 50 percent deductible. Other changes were made and employers must alter how they categorize flights for the new rules.
While cyber liability losses and privacy claims continue to rise, a new exposure has arisen. Hackers have determined that due to the increased sophistication in computer security, it may be easier to manipulate an individual rather than a machine. With enough policies and procedures in place, Social Engineering Fraud (SEF) is preventable. However, what these professional criminals are counting on is being able to manipulate an employee to violate the company’s policies.
While it may seem like the last box to check, planning for the next generation of owners and managers well in advance usually leads to better operational, financial, and tax outcomes. That remains true whether the transition involves a sale to an outside buyer, passing to the next generation of family, or selling to employees. Busting the four myths of business transition planning, you can see how planning ahead is a component of protecting and strengthening the legacies you’ve built.