Magazine article Global Finance

Cross-Border M&A Doubles as Companies Enter New Markets

Magazine article Global Finance

Cross-Border M&A Doubles as Companies Enter New Markets

Article excerpt

FOCUS: MERGERS & ACQUISITIONS

Global cross-border mergers and acquisitions totaled $1.1 trillion during the first nine months of 2014, more than double the level of the same period a year earlier, according to Thomson Reuters. Analysts say companies are taking advantage of their substantial overseas cash positions to make large acquisitions and enter new markets. Some of the biggest cross-border deals so far this year have been so-called "inversions," whereby a US company acquires a smaller company in a low-tax country and then shifts its headquarters overseas to save on taxes. A recent crackdown by the US Treasury department, however, may prevent some of these deals from going forward.

Management at US pharmaceutical firm Abb Vie in October recommended that shareholders vote against its planned $54 billion deal to acquire Irish firm Shire. "The agreed-upon valuation is no longer supported as a result of the changes to the tax rules," AbbVie said in a statement. If shareholders take its advice and vote against the deal, the company could face a $1.6 billion breakup fee.

The Treasury changes prohibit companies from making loans to a new foreign parent using overseas cash stockpiles without paying US taxes, and it has revised five sections of the tax code to restrict tax breaks.

Although the new tax rules could slow the pace of future activity, the value of worldwide M&A through Q3,2014, totaled $2.7 trillion, a 59% increase from the comparable 2013 level, Thomson Reuters notes. …

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