When megamerger collapse – taxes versus business

mergers-and-acquisitions

This is an interesting tale about the supposed third larger merger in history, recently evaporated in the wake of a change in the US tax regulation. This is also a tale about the proposed biggest pharmaceutical deal ever, done for nothing but paying less taxes.
Or maybe this is the demonstration of what happen when a federal administration change the legislation to regulate corporate greed. Again, this could be a story about how a national government crossed path with the free initiative of two major companies. The choice is yours.

Here’s the bare bones. Two pharmaceutical giants, Pfizer and Allergan, started in 2015 a negotiation for a megamerge. We’re actually talking about a 160 billion USD operation, to create a new subject based in Ireland. There were no industrial or strategical benefit of sort in such operation, the main focus was about the 12.5% tax rate in Ireland. It was all about paying less taxes, by the millions.
Consider that Pfizer’s assets are about 170 billion USD and that Allergan’s assets are estimated about 52 billion USD. Both has been very active in the last five years or so about minor merges and acquisitions.
In the USA, federal administration issued changes in the legislation in order to ban such malpractice to avoid taxation. When the changes come in effect the proposed merge breakup.

So, what do you think about that?
Was it a victory of the US national interest versus pharmaceutical corporation?
Was it an unacceptable interference in the free trade market?

To me, this tale is about two main themes. Greed and the end of the industry-driven concept.
Greed self-explains, so I will skip this point. The end of the industry-driven concept is more meaningful. Plotting a megamerger operation this way means that the focus in only about how much money can be extracted, year after year, from the business for the investors. It’s not about conquering a market, nor it’s about crunching the opponents. Research or industrial operativity have also nothing to do with this kind of operation. It’s about investing 200 million USD in the
merger process to achieve much more for the investors. It’s the power of unbelievable quantities of virtual money, untouchable currency exchanged at the speed of light over our collective heads.
National governments and international authorities have been nonplussed, not to mention the rights of tens of thousands of workers. Pfizer and Allergan will try to find other ways to achieve their target and maybe succeed the next year.

We have been warned, loud and clear.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s