German analysts have predicted that the abolition of capital gains tax on the sale of stakes owned by one company in another will change the ownership structure of a great many German companies.
Prior to the 1st January 2002, only stakes held by German companies in foreign organisations could be sold tax free. This led to a significant amount of cross-holdings between German companies, and caused the tight network of leading companies to be dubbed 'Germany Inc'.
Although the global economic downturn has meant that there is unlikely to be the flurry of mergers and acquisitions which was predicted when the measure was first announced in December 1999, analysts have said that they still expect quite a lot of M & A activity in the early part of 2002 as a result of the new tax rules.
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