Inversion Transactions Likely To Continue And Expand Into Other Markets And Industries

During recent months there has been a surge in cross-border M&A activity in which U.S. and non-U.S. companies combine in so-called inversion transactions. Examples of these transactions are Endo International's acquisition of Canadian-based Paladin Labs (February 2014), Perrigo Company's acquisition of Ireland-based Elan Corporation (December 2013), the combination of Liberty Global and Virgin Media (June 2013) and Pfizer Inc.'s recently announced $98.7 billion bid to take over U.K-based AstraZeneca. While the parties emphasize the strong non-tax business drivers for these deals, it is apparent that these transactions are also carefully structured to allow the U.S. corporation to essentially expatriate to a non-U.S. jurisdiction (and thereby reduce its effective U.S. tax burden on future income). As this wave of inversion transactions gathers momentum, there will be greater pressure on the United States Congress to take action to stem this outflow. The perception that