Inversions gain in popularity with help of Skadden lawyers
Lawyers from Skadden, Arps, Slate, Meagher & Flom were biking through Southern France in 2010 when they came up with an idea to help boost the sluggish market in mergers and acquisitions.
The lawyers “dusted off the idea of inversions, which had been around for years but sparingly used,” the Wall Street Journal (sub. req.) reports. The lawyers started pitching the idea to banks. Skadden gained expertise in the tax benefits of buying foreign companies, landing the firm work on several big deals.
The article cites figures from Thomson Reuters showing that, since 2013, Skadden has advised on 12 of 28 proposed inversion deals valued at about $430 billion.
In a corporate inversion, a U.S. company buys a foreign company and relocates its headquarters to the foreign jurisdiction, the Irish Times explains in this article. The deal is called an inversion because the acquired company is generally smaller. The deal benefits the U.S. company because it is no longer forced to pay taxes on foreign earnings, and the foreign corporate tax rate is lower.
Skadden is among the firms working on Pfizer’s Inc.’s deal to buy Dublin-based Allergan, dubbed a “super inversion” because of the size of the deal and terms that give Allergan 44 percent of the merged entity. The size of that stake that will keep the merger from running afoul of new rules designed to stop U.S. firms from buying much smaller companies overseas, the Irish Times explains.
Among those criticizing corporate inversions is Treasury Secretary Jacob Lew, who said last week that “creative accountants and lawyers” are helping U.S. companies avoid taxes. According to the Wall Street Journal, Skadden’s work has landed it “in the middle of an election-year debate about U.S. tax policy and corporate tax planning, with billions of dollars riding on the firm’s efforts.”
