Private equity firms rushed to get deals done in late 2012, partly to beat an expected increase in taxes on gains made from investments. As a result, private equity-backed buyout dealflow in North America reached a post-Lehman high of 1,590 deals valued at $152.3 billion, according to market intelligence firm Preqin. While the lingering uncertainty in the U.S. economy is largely expected to make private equity investors
cautious in 2013, the first week of the year saw plenty of activity.
After much back and forth, at the start of the new year Congress finally announced that the capital gains tax will go from the current 15% to around 23.6%, in line with the level expected by many private equity industry insiders.
The public equity markets seemed to take the news well, with the Dow surging 308.57 points, or 2.35%, and closing at 13,412.55 on Jan. 2. “The market reacted positively [to the fiscal cliff measures] because it had already priced in either no deal or a bad deal being done, but there is still a lot of uncertainty,” said Steve Karol, founder and managing partner of Watermill Group.