Pittsburgh Deal Activity: Estate tax planning considerations for contemplated M&A transactions


The landscape of estate tax planning is set to undergo a significant change in the coming years, as the estate tax exemption is set to revert to pre-2018 levels at the end of 2025. This means that married individuals with estates valued at more than $14 million (half of this if single) will once again be subject to estate taxes, with rates ranging from 18 percent to 40 percent. However, recent proposals by the Biden administration may accelerate this change, with some experts predicting that the estate tax exemption could be reduced as early as the end of 2024.

The changes to estate tax planning also have implications for mergers and acquisitions activity. With the potential for the estate tax exemption to be reduced as early as the end of 2024, founders and families involved in M&A transactions may need to be more proactive in their estate planning efforts to ensure that their assets are protected and their estate tax liability is minimized. This may involve the use of trusts or other estate planning vehicles to transfer assets to beneficiaries in a tax-efficient manner (i.e., while values are lower), as well as the use of insurance policies or other strategies to provide liquidity to cover potential estate taxes.

Overall, the pending changes to estate tax rules highlight the importance of taking a holistic approach to M&A transactions, one that considers not only the financial and strategic implications of the transaction itself, but also the estate planning and tax implications for high-net-worth individuals and families.

By working with experienced professionals and staying informed about changes in the tax landscape, individuals and families involved in M&A transactions can ensure that they are well-positioned to protect their assets and minimize their tax liability.

M&A Market Activity

U.S. deal volume declined in April 2023 as compared to the prior month. Through the first four months of 2023, U.S. M&A deal volume decreased by over 25 percent compared to same period in 2022.

Similar to the overall U.S., the Pittsburgh M&A market experienced a decline in deal volume in April 2023 with deal volume falling by 25 percent as compared to March 2023. April 2023 did, however, see several noteworthy transactions in the Pittsburgh region. Pittsburgh-based companies SRI Quality System Registrar, Evoqua Water Technologies Corp., InvestEdge, Prodigo Solutions, and Center Rock completed sale transactions within the month.

Deal Of The Month

Headquartered in Pittsburgh, PNC RiverArch Capital is a middle-market private equity firm that has completed more than 30 platform acquisitions and has invested in excess of $1 billion since its inception in 2011.

On April 3, 2023, PNC RiverArch Capital sold Feeders Supply Company LLC, an omnichannel pet specialty retailer, to Houchens Industries Inc., an operator of retail grocery, convenience and neighborhood market stores. By selling FSC to Houchens, an employee-owned business, the employees of FSC now have an opportunity to become equity owners of Houchens and share in the success of the combined businesses. Along with the sale of FSC, PNC RiverArch Capital completed a second exit with the sale of Shearer Supply Inc. to Investcorp Holdings B.S.C. during April. ●

Tom Freeman is a Senior Advisor and Evan Lyons is a Vice President with MelCap Partners, LLC, a middle-market investment banking advisory firm. For more information on MelCap Partners, please visit www.melcap.com or email [email protected] or [email protected].