Lazard Ltd Chairman and CEO Kenneth Jacobs said certain potential policy proposals being floated in Washington, such as the repatriation of corporate funds, should help improve M&A activity, but it is unclear how other reforms might impact dealmaking.
During an earnings conference call, Jacobs said the repatriation of funds could lead to more investments and perhaps greater M&A activity. He added that lowering the top statutory corporate tax rate should help company valuations, which can also benefit M&A.
"There are very few losers in that discussion from a corporate standpoint," he said.
However, Jacobs said some tax reform plans might not benefit all companies. He said it is difficult to analyze the impact of some other proposals such as the border adjustment tax and the elimination of the interest expense deduction that policymakers are discussing.
"There are going to be winners and losers," he said.
Jacobs was asked if some policy changes could lead to increased restructuring activity. He added that it is too early to tell if tax changes would lead to increased restructuring or other dealmaking as more details are needed about which tax reforms lawmakers will institute.
Jacobs noted that, in general, company valuations have increased since the U.S. elections because market participants believe tax reform, deregulation and infrastructure improvements should lead to incremental GDP growth, increased company investments and higher earnings. He said the market has been expecting the new presidential administration to make policy changes that benefit corporations. If reforms do take shape, Jacobs said the market can sustain or increase valuations.
"If it becomes more questionable or cloudy or uncertain, I think that has implications as well," he said.