Contact: James Igoe
Deloitte
Public Relations
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Deloitte, the business advisory firm, is predicting a surge in M&A activity following changes to the Capital Gains Tax (CGT) regime announced by the Chancellor in Tuesday’s Pre-Budget Report.

The new regime, which takes effect from 6 April 2008, effectively increases the tax payable on profits from the disposal of shares from 10% to 18%. The result of this is likely to be the acceleration of sale plans by investors keen to avoid paying additional tax. It is highly probable that private equity will be a leading player in such disposals.

Paul Zimmerman, Corporate Finance Partner at Deloitte, said: “We expect to see a substantial increase in the volume of deal activity over the coming months as business owners and private equity investors bring forward disposal or restructuring plans to avoid the higher costs that will be incurred from April.

“Owners and investors who had planned to sell their interests in a business in a year or two’s time are likely to accelerate their plans and sell now, rather than lose an additional 8% in six months time. However, it remains vital to properly plan and effectively execute a sale to maximise value, and get the right price. Without this, a rushed disposal could mean the seller misses out on a whole lot more than the 8% that CGT changes threaten to erode.”

Andy Newsome, Head of M&A Tax at Deloitte, added: “To date, the capital gains tax rate of 10% has been seen as an acceptable cost on a business exit for many entrepreneurs. Clearly, the near doubling to 18% will impact the decision whether or not to sell. We expect to see a short term flurry of activity as business owners and private equity investors incorporate the tax benefit of selling before next April into their exit plans.”

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About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP, which is among the country's leading professional services firms. Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu ("DTT"), a Swiss Verein whose member firms are separate and independent legal entities. Neither DTT nor any of its member firms has any liability for each other's acts or omissions. Services are provided by member firms or their subsidiaries and not by DTT. Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.