Private equity firms hesitate on new tax laws

Private equity company’s are facing the possibility of having to stop work on current deals as they review the effects of new tax rules that end tax relief on loan finance.

A report by the Centre for Management Buy-out Research predicts that the £5bn worth of deals funded by private equity in the first quarter could be facing a 10% reduction in returns because of the new rules, introduced during last week’s Budget.

This would see private equity businesses cut the prices they are prepared to pay for targets, according to The Financial Times

‘In terms of how this is likely to affect deals which are currently work in progress, there is likely to be hiatus with private equity teams downing tools,’ said Tom Lamb, managing director of Barclays private equity.

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