National Insurance and dividend tax increases announced by the Government yesterday could prompt business owners to drive for greater shareholder value, according to Adam Zoldan, Director at Knight Corporate Finance.
"For the time being capital gains has been left alone and its relative discount to income has now increased," he stated.
"Top rate tax payers will now pay almost double the rate on dividends (39.35%) as they will in the event of a capital gain.
"In theory this may encourage entrepreneurs to increase investment in their businesses to build shareholder value rather than take cash, which could benefit the economy.
"From a transaction perspective, the level of activity is high and this could influence more activity. In very broad terms a business owner who exits on a multiple of 6 x EBITDA could realise in excess of 12 years post-tax earnings in one hit."