Pitcher Partners says smaller firms to profit from mid-market M&A

Research shows small and medium-sized accounting firms are set to capitalise on strong mid-market M&A activity, with the big four focused squarely on billion-dollar deals, says Pitcher Partners.

According to the Dealmakers: Middle Market M&A in Australia 2015 report, produced by Mergermarket and Remark in collaboration with Pitcher Partners, middle-market M&As increased by 21 per cent in 2014 with transactions between $13 million (US$10 million) and $64 million (US$50 million) accounting for two of every five deals.

Simon Johnson, principal of corporate finance at Pitcher Partners, said this has created an environment in which small and medium-sized accounting firms can play a major role in a large range of M&A transactions.

Mr Johnson said mid-tier and smaller accounting firms are in the “box seat” to advise on mid-market M&As.

“What we find is that the big four are very much geared up towards assisting large corporate clients… the big four accounting firms worry about billion dollar deals,” he said.

“If our research shows anything, it’s that small and medium-sized accounting firms have more intimate relationships with their clients, are more aware of the strategy of their clients and the personal aspirations of the founders or the owners and as a result are in a much better position to be advising on these (mid-market) sorts of deals.”

Mr Johnson said the type of firms that have been active, or are expected to become active in the M&A market, are typically those working with mid-tier or smaller accounting firms.

“They’re all represented by firms like Pitcher Partners and other smaller local accountants," he said. 

To capitalise on this opportunity, Mr Johnson said accountants need to be proactive in implementing M&A strategies for their clients, with early planning essential for the best results .

"There’s no reason everyone can’t be having a discussion around proactive buying and selling and business value,” he said.

“For accountants, it means that you should be having proactive conversations with their clients around things like succession planning.

“If there’s anything we've learnt and we’ve tried very hard to communicate in this report is that those businesses which are looking to sell, those who are prepared and have been preparing for more than a year in terms of getting their business attractive and ready for a sale, they’re really going to benefit, come purchase price time.

"They’re getting a premium in the market,” Mr Johnson said.

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Labor Spells Out Tax Avoidance Package Targeting Multinationals

The federal opposition has proposed a $1.9bn package targeting multinational tax avoidance, with most of the savings slated to come from changes to the amount of debt for which companies can claim deductions in Australia.

Bowing to sustained government pressure to start spelling out alternative budget savings, Labor’s leader, Bill Shorten, said the measures were designed to ensure everyone paid “their fair share of tax”.

The opposition said the Parliamentary Budget Office had assessed the measures as bringing in $1.9bn in revenue over three years from July.

They include $1.65bn from changing the current “thin capitalisation” rules to ensure companies could no longer claim up to a 60% debt-to-equity ratio for their Australian operations. The relevant test would instead be the ratio of the company’s entire global operations.

The Labor policy brief said: “This means that if a company has an average 30% debt-to-equity ratio across its different subsidiaries, it will only be able to claim tax deductions up to that level.”

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The proposal goes beyond changes to thin capitalisation that passed the parliament in 2014.
Shorten said Labor was determined to shut down loopholes that allowed big multinationals to send profits overseas.

“This won’t be easy and that’s why we want to keep working with experts but we should start putting rules in place now,” he said.

“How can we ask Australians to work hard and pay tax if we let big multinationals off the hook? How can Australian businesses compete if they pay more tax at home than big multinationals?”

The other proposed measures are:

• Better aligning Australian rules on hybrid entities with tax laws in other countries, delivering $100m to the budget;

• Bringing forward by a year the July 2016 start date for third-party reporting and data matching, gaining $90m;

• Providing funding for increased compliance by the Australian Taxation Office to ultimately deliver a net saving of $67m over the budget cycle.

Labor also is planning to set up a “multinational tax expert panel” to ensure the changes work as intended and to “assist with the implementation and refinement” of the measures.

The prime minister, Tony Abbott, has repeatedly accused the Labor party of “sabotaging” budget repair by joining with other parties to block contentious measures in the Senate.

Labor’s continued campaign against the “unfair” 2014 budget prompted Abbott and senior ministers to call on the opposition to outline alternatives.

The treasurer, Joe Hockey, will highlight long-term pressures on the nation’s finances with the release of the Intergenerational Report on Thursday, attempting to reset the budget debate in the lead-up to the next economic statement due in May.

Some of the government’s stalled measures appear unlikely to proceed, with Abbott soon expected to announce the dumping of contentious Medicare changes.

This news story is reprinted from www.theguardian.com

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Action Is Needed Over Tax Avoidance, Not Big Talk

That Labor’s corporate tax policy has been so vociferously attacked by the business lobby proves it is on the right track.

The usual suspects, the Business Council of Australia, the Australian Chamber of Commerce and Industry and the Minerals Council of Australia, all emerged on Monday like sprinters out of the starting blocks with their inevitable PR offensive. Any suggestion that big business pay more tax, let alone its fair share, is savaged mercilessly.

Treasurer Joe Hockey had led the charge in Parliament, claiming, typically, that the Opposition’s plan to tighten the thin capitalisation rules would cost jobs. This is pure, unfounded scaremongering. It might be a small first step but at least Labor has a plan, and it is carefully costed.

Contrast this with the government’s sneaky cave-in on Section 25-90 before Christmas, another $600 million gift to multinational tax avoiders. Overturning these tax breaks on foreign debt was a Labor initiative too, quashed by a craven government keen to curry favour with the business lobby.

Sadly, this latest fury over the thin cap rules plays straight into the hands of the corporate tax fraternity. The debate has been confined to a political barney over relatively small and highly complex tax issues. We, too, were highly critical of Labor’s policy this week, but for not doing enough. At least they are doing something. They deserve points for that.

If the business lobby were acting in the national interest rather than the narrow interests of some of its major funders, it would show leadership by splintering on the issue of tax. This is not a level playing field. Those who don’t shift profits though Singapore or the Cayman Islands are at a disadvantage to those who do. Those companies who pay their fair share ought to distance themselves from the big avoiders.

If any proof were required of the hollow rhetoric on the subject of multinational tax avoidance by the business lobby, look no further than the various peak body submissions to the upcoming corporate tax inquiry. We have dealt with the BCA submission, which is weak.

However, the submission from the Minerals Council of Australia is far worse. As a manifesto in sheer manipulation, it warrants examination.

This news story is reprinted from www.smh.com.au

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Private Sector Credit Rises 0.6% In Jan

The value of loans outstanding to the private sector grew in January, but personal credit has continued to flatline, data from the Reserve Bank of Australia shows.

The central bank’s financial aggregates for January show total credit increased by 0.6 per cent, after rising by 0.5 per cent in December. The result beats forecasts by analysts surveyed by Bloomberg, who had tipped a 0.5 per cent increase in the month.

In the 12 months to January total credit growth came in at 6.2 per cent, increasing on the 4.1 per cent rise in the previous year. Again, the result beat expectations, with analysts surveyed by Bloomberg having tipped a gain of 6 per cent.

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But personal credit growth was flat in January — after posting the same flatline result in December and November.

Business credit, meanwhile, increased 0.8 per cent in the month after lifting 0.5 per cent in December.

Housing credit grew by 0.6 per cent in January after posting the same increase in December.

Broad money, which includes currency, deposits and other short-term liquid liabilities, rose by 0.4 per cent in the month, after lifting 0.7 per cent in December.

For the twelve months to January, housing loans rose 7.1 per cent, compared with 5.6 per cent growth in the previous year.

But the growth of personal loans slowed in the last twelve months. Personal loans lifted 0.8 per cent in the year to January, down from a 1 per cent lift in the prior year.

Business loans, meanwhile, had lifted significantly over the year, rising 5.5 per cent, compared with a 1.9 per cent rise in the previous year.

Broad money rose 7.3 per cent over the year, up from 6.3 per cent over the prior year.

This news story is reprinted from www.businessspectator.com.au

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Gillian Triggs: Tony Abbott says Government has lost confidence in Human Rights Commission president

Prime Minister Tony Abbott says his Government has lost confidence in Human Rights Commission (HRC) president Gillian Triggs.

Gillian Triggs

Tensions between the Government and the HRC have been on public display recently, with Mr Abbott saying the commission's damning report into children in detention was "a blatantly partisan, politicised exercise".
Professor Triggs revealed this morning during a Senate estimates hearing that the secretary of Attorney-General George Brandis's department had asked her to resign during a meeting on February 3.
Senator Brandis then confirmed to Senate estimates he had lost confidence in Professor Triggs and wanted her to resign, saying the commission "has to be like Caesar's wife" and "beyond blemish".
Mr Abbott confirmed in Question Time the Government no longer had confidence in Professor Triggs.
"It's absolutely crystal clear this inquiry by the president of the Human Rights Commission is a political stitch-up," he said.
"All I know Madam Speaker is that this Government has lost confidence in the president of the Human Rights Commission."
Professor Triggs told Senate estimates the purpose of the February 3 meeting "was to deliver a request from the Attorney".
"And what was the nature of that request?" Labor senator Jacinta Collins asked.
"The nature of that request was to ask for my resignation," Professor Triggs said.
She said she was deeply shocked by the request and rejected it.
"My answer was that I have a five-year statutory position, which is designed for the president of the Human Rights Commission specifically to avoid political interference in the exercise of my tasks under the Human Rights Commission Act," she said.
Professor Triggs also testified that the secretary, Chris Moraitis, told her she would be offered another job if she did.

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She described the offer as "entirely inappropriate".

"I don't recall the precise words but I know that he said that I would be offered other work with the Government," she said.
She testified she felt her resignation would risk the integrity and independence of the HRC.

Mr Moraitis has a different recollection of the meeting with Professor Triggs.
He said he did not ask Professor Triggs for her resignation but confirmed he told her Senator Brandis had lost confidence in her and that they discussed the possibility of her taking on another government role.

Senator Brandis said he lost confidence in Professor Triggs in mid-January.

"It saddens me to say that because as Professor Triggs herself has said, our relationship has never been anything other than cordial," he said.

"But after the November [Senate] estimates — when on any view Professor Triggs gave inconsistent and evasive evidence on the circumstances in which the decision was made to hold the inquiry which we have been discussing, in particular when Professor Triggs conceded that she had made a decision to hold the inquiry after the 2013 election and had spoken during the caretaker period, quite inappropriately, with two Labor ministers, a fact concealed from the then-opposition — I felt that the political impartiality of the commission had been fatally compromised.

"The Human Rights Commission has to be like Caesar's wife, it has to be beyond blemish."

Government should not shoot the messenger: backbencher

Liberal backbencher Craig Laundy has raised concerns about his Government's treatment of Professor Triggs.
In a party room meeting today, the member for Reid told Mr Abbott the Government should not "shoot the messenger".
Several sources said Mr Laundy urged the Government to focus on its policy success in stopping the boats and continue to get more children out of detention.

The ABC has been told Mr Abbott responded to Mr Laundy's question.

The Prime Minister reportedly said the Government had to call people out when it thought it was being treated unfairly.

It is understood Mr Laundy told colleagues he was just echoing the concerns of people in his electorate.
Policies of both parties harm children in detention: Triggs

In her opening address to the Senate committee, Professor Triggs moved to make it clear she believed both Labor and Coalition policies harmed children in detention.

"The bipartisan nature of government responsibility for this damage is clear on any fair reading of this report," she said.

The HRC report, titled The Forgotten Children,found immigration detention was a "dangerous place for children" and called for a royal commission into the practice of putting asylum seeker children into mandatory detention.

From January 2013 to March 2014 the HRC found there were 233 assaults in detention involving children, 33 incidents of reported sexual assault, with the majority involving children, and 128 children who harmed themselves.

The Government said it was committed to removing all children from detention and that under the previous Labor government the number of children in detention reached almost 2,000.

This news is reprinted from  http://www.abc.net.au/news/2015-02-24/gillian-triggs-says-brandis-wants-her-to-quit-rights-commission/6247520

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Tax Break For Rich Worst Public Policy Since White Australia

Superannuation tax breaks for the rich is the ‘worst piece of public policy since white Australia’, Garry Weaven pioneer of industry funds said at Conexus Financial’s 18th annual Investment Administration Conference, held last week.

Addressing more than 200 superannuation professionals, Weaven said most countries view Australia’s system as close to perfection, but despite this significant changes needs to take place to make the system sustainable.

“The Peter Costello gift to the rich by entirely abolishing earnings tax for older people and by lifting the limits dramatically of what they can pump in [to superannuation], has generated massive amounts of concessionality that is devoted to the mega-rich in their later years,” Weaven said.

“It is probably the worst piece of public policy since the white Australia policy.”

Weaven said the continuing increase of average life expectancy is underpinned by a persons’ finances – their access to quality accommodation, health and aged care are all dependent on being able to afford them.

“It will be a tragedy if poor people die and rich go on living forever,” he said.

Ian Silk, chief executive of AustralianSuper agreed, and said superannuation was not designed for taxpayers to provide tax benefits to multi-millionaires.

“I would go with a more interventionist regulatory framework that might have, for example, limits on the taxation benefits that individuals can take out of the systems,” Silk said.

“I’ve seen reports of people with double-digit-million-dollar superannuation accounts, even triple-digit-million-dollar superannuation accounts. Put as much money in the system as you like, but don’t expect to get taxation benefits beyond a reasonable level.”

Silk said that a consensus needs to be reached on the purpose of superannuation as this will allow issues within the sector to be effectively addressed.

“The superannuation system is an arm of public policy, it is essentially a creature of two sets of parliamentary acts, concessionary tax savings vehicle and it’s compulsory, this infers on parliament the right to intrude,” he said.

Weaven, Silk and the chair of MLC’s superannuation funds’ trustee boards, Nicole Smith, are all supportive of the financial systems inquiry recommendation that superannuation should be defined as “providing income in retirement to substitute or supplement the age pension”.

“It may seem simple, but it is profound, if we start from that premise, some problems become easier to solve. I say this with hope of a bipartisan view,” Smith said.

Silk was also heartened to see the FSI recommend responsibility for products to be shared between designers and financial planners, saying in some past instances the designer’s poor product had “strapped a suicide bomb on financial planners”.

This news story is reprinted from www.professionalplanner.com.au

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Economic Growth To Stay Sluggish: WBC

The Australian economy is expected to grow at a below-trend pace of 2.75 per cent for most of 2015 because business investment is expected be weak throughout the year.

The Westpac/Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, only rose by 0.30 percentage points in January, and has been below trend for a twelfth consecutive month.

“We still believe that an interest rate cut in March is the best policy to support domestic demand and maintain downward pressure on the Australian dollar and this outcome remains our forecast,” Westpac chief economist Bill Evans said.

This news story is reprinted from www.businessspectator.com.au

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