Dealmakers adapt to U.S. tax-inversion restrictions – Lexpert

Paul Seraganian

Apr 28, 2016

Old bad news is better than new bad news, Lexpert writer Julius Melnitzer says in his article, “Dealmakers adapt to U.S. tax-inversion restrictions.” Earlier this month the U.S. Treasury Department released new anti-inversion regulations that could affect Canadian M&A. “The regulations merely implemented rules that everyone has known were coming for at least a year,” says Osler’s Paul Seraganian. “So their effect has been baked into Canadian M&A deal flow for some time now.”

With the new regulations, it will be harder for corporate expatriations to occur between the U.S. and countries with lower tax rates. The hope is that these rules will put a stop to large corporation mergers like that of Burger King and Tim Hortons in 2014.

“What the IRS is really not happy about are non-U.S. companies that have become larger by gobbling up U.S. companies and then taken on larger and larger targets,” says Paul.

These types of inversion transactions are especially apparent in the life-science sector as companies try to leave the U.S., which has the second highest corporate tax rate in the world.

Although the new rules may be far-reaching, Paul doesn’t think they will be a “significant game changer” for Canadian M&A.

“We believe that there will continue to be strong motivation for U.S. corporations to pursue inversion-style transactions and that, given the strong economic and geographical connection between Canadian and U.S. markets, Canada will become an increasingly attractive M&A destination for these U.S. companies,” he says.

To read more about these new regulations, read Julius Melnitzer’s full article, “Dealmakers adapt to U.S. tax-inversion restrictions” online at Lexpert, April 26, 2016.