Trending Now

Building a Resilient Supply Chain with Advanced Predictive…

New Articles

Major Los Angeles Industrial Estates Acquired by Goodman Group

Archives, Global Trade Daily, News

Major Los Angeles Industrial Estates Acquired by Goodman Group

Leave a comment

Goodman Group can now add two major Los Angeles-based industrial estates to it’s acquisitions list. A former L.A. distribution center and Long Beach Boeing C-17 manufacturing plant confirm a total of 127 acres for the acquisition and will be recognized as the “Goodman Commerce Center Long Beach” and “Goodman Commerce Center Los Angeles.”

“Supply across the Los Angeles market is heavily constrained with a current total vacancy rate of approximately one percent. This makes the size and location of these facilities beneficial to prospective customers looking to improve their delivery speed to market,” said Anthony Rozic, CEO of Goodman North America. “This will be the first time these sites have been available to customers, having been owned and occupied by the former owners for a long period of time.”

Goodman confirmed it will utilize the newly acquired sites to provide its customers industrial-specific opportunities, citing the optimal urban locations as advantageous in targeting large consumer populations. The industrial property group added $3.7 billion to its U.S. development pipeline and will continue seeking logistics-focused acquisitions within the Los Angeles, Inland Empire, Northern New Jersey and the San Francisco Bay Area regions.

“As advances in technology, changes in consumer behavior and the continued urbanization of gateway cities are driving the demand for well-located industrial space, we continue to invest in, develop and manage facilities close to consumers and key infrastructure such as ports, airports and major motorways enabling customers to develop an efficient supply chain and provide faster transit times,” concluded Rozic.

Source: Goodman Group

Archives, Commentary, Global Trade Daily

How US tax overhaul has led to increased international investment and M&A activity

Leave a comment

The limit on interest deductibility is impacting the way that firms finance domestic mergers and acquisitions which is fueling the existing trend for US companies to pursue foreign M&A.

Why invest in foreign companies?

Growing a business internationally has always been attractive to US companies. Businesses are still structuring for tax purposes, however the main reasons for going abroad are now; the desire to find new markets with more customers, access fresh talent and technology and optimize international supply chains. Foreign markets can be an attractive destination for leading US brands given that if you can succeed in the world’s most competitive consumer market you may find you thrive in less developed economies.

 

Deduction changes

With the recent tax reforms in the US, there have been some changes in the way deductions can be applied affecting the financing of domestic mergers and acquisitions. Often mergers are at least partially funded with debt which would be paid off in the form of a dividend. The dividend would be deductible making it a tax efficient way of financing the acquisition.

This deduction has been reduced greatly in the 2018 US tax reform. Companies were previously unrestricted in the amount of interest they could deduct before tax, but now there is a cap deduction of 30% of their 12-month earnings before interest, taxes, depreciation, and amortization (EBITDA). After 2021, the limitation becomes even more constraining by switching to 30% of EBIT only – that is, the deductions for depreciation and amortization are removed from the calculation, lowering the cap even further.

The deduction applies only when acquiring domestically, so not when buying a foreign company. You can still get the full deduction on dividends for a foreign owned corporation. Based on the current interpretation of the legislation, if you are looking to finance via debt, buying a foreign company will still allow you to benefit from this type of funding mechanism.

Why foreign M&A is more attractive

For insights and an introduction to M&A and carve-outs, take a look at the “M&A and Carve Outs from A to Z” eBook.

Other elements of the tax reform are also likely to drive further M&A and make it more likely that US firms look abroad for these acquisitions:

  1. The tax reform was structured to incentivise businesses to bring money back to the US if they are holding historic earnings off-shore. This windfall of foreign held monies will enable some companies to invest more, with a portion of this spending likely to fuel M&A.
  2. Related incentives to bring money back to the US have also reduced the tax on repatriation of future foreign earnings. Meaning that the return of investment for these foreign assets is improved.

What we are hearing from our clients is that US companies will continue to look to the global market as a way of leveraging faster growth and diversifying their business.

TMF Group

TMF USA are experts when it comes to M&A and international expansion, supported by a strong global presence in more than 80 countries worldwide. While there are always challenges when it comes to foreign investment the recent tax reform has introduced a whole new set of considerations. Please get in touch to find out how we can support your business achieve its global ambitions.

Find out how our services allow our international clients to maintain focus on what matters most to them.

Acquisitions, Archives, Banking on Global Trade, Global Trade Daily, News

Mergers and Acquisitions Touted Over FDI

Leave a comment

Washington, DC – For decades, state and local governments have offered packages of tax breaks and other incentives before foreign companies in the hope of luring them to the US to create jobs.

A new study published by the Brookings Institute asserts that strategy is “deeply flawed” and that “mergers and acquisitions are driving foreign investment in the US, not the opening of new establishments.”

Civic leaders, in turn,” would accomplish far more by bolstering industrial amenities to retain overseas companies than by offering rich subsidies designed to attract new ones,” it said.

“Policies that narrowly focus on (new business) openings are probably not going to give you a big bang for your buck,” according to Devashree Saha, a senior policy analyst at Brookings and lead author of the report.

In 2011, only 26 percent of all jobs at US locations of foreign companies were created by the opening of a new factory, office or store, while nearly a third were generated by foreign takeovers of US companies, Saha said, citing data from the Organization for International Investment (OFII) that found that, over the past two decades, 84 percent of foreign companies that came to the US did so through an acquisition.

“Federal, state and local governments should invest more to build strong industry clusters by ensuring an adequate supply of skilled workers, modernizing US infrastructure and increasing investment in research and development, among other initiatives,” the Brookings study said.

According to Nancy McLernon, president of the Washington, DC-based OFII, state and local leaders often ignore foreign companies that come to the US through mergers instead of connecting them with suppliers, customers and skilled workers. “That aftercare is critically important,” she said.

The US share of global foreign direct investment plunged from 37 percent in 2002 to 17 percent in 2012, according to OFII. The US is still the worldwide leader, but emerging markets such as China have grabbed a growing share of foreign dollars.”By recognizing the importance of mergers and acquisitions, we can capture more of that market share,” said McLernon.

Foreign-owned companies employ about 5.6 million workers in the US, or about 5 percent of private payrolls, according to the Brookings paper. Their employment grew steadily from 1991 to 2000, but has stagnated since.

Yet, it said, the firms generate outsize benefits, accounting for a fifth of US goods exports and 15.4 percent of all private research-and-development in 2011 with foreign owners of US operations paying higher wages than US companies — $77,000 vs. $60,000, on average.

07/29/2014