Corporate Inversion…

AbbVie

AbbVie’s $55BN  bid for UK drug maker Shire was approved, providing yet another footnote in the history of corporate inversion by the US companies largely motivated by an opportunity to avoid US corporate taxes.  The combined firm will move to UK, saving upwards of $8BN in US corporate taxes by some estimates.  While such a move certainly rubs policy makers the wrong way, in reality isn’t this a perfect case study in the free market economy?  People / companies have moved across state-lines for better opportunities so why not across country-borders in today’s global economy?  Some compare this to individuals denouncing US citizenship to save on personal taxes – I think that’s a bad comparable.  The latter is unthinkable, outrageous (I am an ex-military after all).  Cry of jingoism will not solve the problem – only permanent solution is to change the US corporate tax laws so that we can be competitive, on the level playing field with the likes of Ireland, etc.  It’s been a couple of years since Chicago lost Aon to UK (well-respected board members resigned in protest).  We were bracing for the same after Walgreens / Boots (UK) merger.  Fortunately, Walgreens announced that they are here to stay.  Every accretion / dilution model has a black-box, designed to justify “positive synergy” that may or may not come to fruition.  I am just trying to imagine how to build one for inversion tax savings…

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About Richard Lee
Experienced finance and operations professional. Currently partner in five companies, adjunct professor of economics at Columbia College and executive contributor to a small business blog (www.SMBmatters.com); following corporate finance, M&A and management consulting tenures with Orbitz and Diamond Technology Partners; and six years of service with the United States Army.

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