When the most substantial tax overhaul in 30 years was approved in late 2017, many investors thought the changes could usher in an explosion of mergers and acquisitions and lead to thriving, expanding businesses.

By now, however, it’s clear that the impact of tax reform on M&A is more nuanced.

Let’s take a step back and explore what’s been happening with M&A. Around this time last year, U.S. deal volume was strong, but value was down several percentage points from the previous year. There were a handful of mega-deals — transactions of at least $5 billion — but overall the story was quantity, not dollars.

Now consider 2018. The latest PwC Deals Industry Insights shows that mega-deals are happening at a rapid rate, with an average of two deal announcements each week. At this pace, M&A value should continue to reach new highs and easily outscore 2017.

Has Tax Reform Been a Deals Driver?

Over the last few years, companies in the United States and abroad have had more available capital and more affordable debt than ever, encouraging growth in the global economy. Tax reform brought another potential cash flow for many companies.

Meanwhile, valuations for potential deal targets remain high. Companies now expect to have more cash on hand, thanks to lower tax rates and repatriation of overseas funds. But those provisions aren’t driving deals by themselves. Rather, they’re just another part of the equation as companies consider M&A opportunities.

A recent PwC survey found that since tax reform, 19% of companies have moved forward with M&A activity. That pales compared to the 63% of companies that have invested in their employees, and it also trails those who have invested in their long-term business strategy or paid off debt. This demonstrates that companies are spending newfound money, but they’re prioritizing other needs ahead of deals.

At the same time, the outlook for deals is positive, with 51% of survey respondents saying they plan to invest in M&A activity in the coming year.

But even with the extra cash from tax reform, executives have to consider other factors before they commit to a deal. Interest rates may continue to tick up. Talent scarcity and low unemployment are raising compensation expenses. The government’s position on antitrust is unclear. And there’s continued potential for inflation.

U.S. companies are also cautious with big investments as one of the longest economic expansions continues, begging the question of when it will end.

Financial buyers who use significant acquisition debt to fund their deals have historically benefited from the tax shield provided by the interest expense, as there has been no limit on deducting interest.

With tax reform, financial buyers now need to adjust their models to account for interest deductibility limits. Such adjustments may lead to cash flow reductions, although in many instances the increased cash flow from the lower federal tax rate will more than offset the reduction caused by the interest limitations.

Another consideration is the uncertainty around inbound investments. Some tariffs imposed by the current presidential administration may have little impact. But others could force companies to reconsider operations and investment strategies, taking their focus away from potential deals.

The Real Beneficiaries of Tax Reform

Many public companies are using money from tax reform for stock buybacks, dividend payouts, and employee compensation. This is a low-risk and immediate way for companies to invest in themselves and in their talent pool.

Among private companies, many executives say they’re still assessing how they might deploy their extra cash. So far, a reported 26% are planning to reduce debt, but many are uncertain how to use the money. For instance, the CEO of one fuel wholesaler described the firm’s approach as “spreading the money around for now, looking to experiment and invest more money in employees.”

Other private companies are seeking to balance investing in the business with raising returns for owners. Planned allocations range from increasing employee pay to upgrading equipment and software.

It’s notable that since the new tax bill became law, the U.S. unemployment rate has fallen to 3.9%, the lowest since 2000, and the National Federation of Independent Business reports record small business optimism.

There are still a lot of unknowns as the long-term impacts of tax reform roll out in the coming months and years. After making some early decisions on where to deploy cash, companies may start taking a longer view — assessing their growth options and what it takes to get there. M&A certainly could play a part, especially as the economy continues to hum.

There may not be much direct cause-and-effect when it comes to tax reform and deals to date, but stronger companies generally are in a better position to make bold moves. We look forward to seeing what those moves look like this year and beyond.

Bob Saada is U.S. deals leader, and David Hall an M&A tax partner, at PricewaterhouseCoopers.

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