M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Thursday, December 31, 2015

Are inversions good for you?

A new paper suggests they are good for someone , but perhaps not you and me. Here's the abstract for Are Corporate Inversions Good for Shareholders?:

In 2014 alone, U.S. firms worth over half a trillion dollars announced their intention to expatriate to a foreign country -- a corporate inversion -- in order to reduce corporate income taxes. To discourage expatriation, U.S. law requires shareholders of inverting firms to realize a personal capital gains tax liability at the completion of the transaction. Thus, while reduced corporate taxes benefit all shareholders equally, a corporate inversion results in a personal tax cost that depends on the individual investor's tax basis and standing. We develop a model to value the net benefits of inversion and we show that the private returns to investors varies widely across individuals. We find that the benefits of inversion disproportionately accrue to the CEO, foreign shareholders, and short-term investors, while many long-term investors suffer a net loss.

-bjmq

http://lawprofessors.typepad.com/mergers/2015/12/are-inversions-good-for-you.html

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Comments

I wrote an article exploring a very similar question, which will be published in a few months by the SMU Law Review. Any comments or suggestions would be more than welcome!

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2732896

Posted by: Greg Day | Mar 3, 2016 5:45:08 PM

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