Law firms are this week awaiting an Australian Taxation Office determination on private equity taxation which may create a flood of M&A work after months of uncertainty.

Middletons M&A partner John Mann told ALB that the ATO determination will have a positive impact on the legal industry, regardless of the outcome.

"If there is a change in regulation, law firms will be tasked with analysing the changes to realise the most cost effective way of exiting an investment or, if there is no change, there is likely to be a surge in exiting and reinvestment in the market," he said.
 
All this follows the ATO's attempt to claim A$452m in tax from the Texas Pacific Group float of the Myer Group. "It's going to be an interesting result and will have a major effect on the industry," Mann added. Prior to the GFC, private equity had been an active segment of the M&A market, but during 2009 there were very few equity exits with most portfolio companies instead focused on reorganising portfolios, Mann said.  As private equity investments generally have a three to four year business cycle, Mann argued there would be a number of investments prime for exiting that were not being sold, as owners were staying put until the ATO ruling.  

Middletons taxation partner, Philip Diviny, agreed, adding that private equity owners were sitting on assets in Australia worth around A$10bn, "which they would rather sell than hold, however are currently staying put".

- by Olivia Collings

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