Tax reform might not have that big of an impact on big firms' deal strategy or capital allocation plans just yet, according to a Jan. 24 note from BofA Merrill Lynch Global Research.

"Initial color from companies is consistent with our view that tax reform incentivizes companies to deleverage, and that companies with repatriated overseas cash will use it in place of supply and additionally plan to pay down existing debt," analysts wrote.

But BofA added that a number of its investment grade companies have said that their M&A strategies are unchanged by tax reform.

In the last week, these are the firms in BofA Merrill Lynch's coverage that made a comment on their plans for any tax-related windfall in fourth quarter earnings calls.

  • Johnson & Johnson (JNJ) finance chief Dominic Caruso said his firm will use most of its repatriated cash for U.S. operations and paying down existing debt through maturities instead of tenders. The company's capital allocation strategy as a result of having more cash is still the same as pre-tax reform, BofA said.
  • Verizon Communications Inc. (VZ) CEO Lowell McAdam said the company plans to use a tax windfall "primarily" to pay down debt, too. The company said it still favors organic growth over deal-driven growth.
  • Merck & Co. Inc. (MRK) CEO Kenneth Frazier said declining M&A volumes in his sector was not related to tax uncertainties, but rather stretched valuations.
  • International Business Machines Corp. (IBM) said its repatriated cash is "not really a near-term capital allocation issue."
  • Halliburton Co. (HAL) said priorities for use of its repatriated cash are to first pay down its next debt maturity, focus on capex and hone in on shareholder returns

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