Case Study On Cross Border Merger And Acquisition

The role of multinational companies (MNEs) in international trade has become very great importance in the last 20 years. This is in large part to the increase in the integration of national economies and technological progress, in particular in the area of communication. The growing importance of MNEs develop complex issue of taxation on both the tax administration as well as MNEs, since the regulations of each country in the taxation of MNEs can be considered in isolation, but should be considered in the wider international importance (Grimwade, 2000).

• Transaction structures—the takeover could involve a cash offer, a share offer, an asset swap or a combination of these methods. Need to consider legal, taxation and accounting issues.

of the acquiring corporation . . . , and the acquiring corporation must be in control of the other corporation immediately after the

Instructions: You should prepare a legal memorandum to your client providing tax advice on the proposal set forth here. Be sure to include citations to code sections, regulations and other authorities that you rely upon in reaching your conclusion. The paper generally runs about two to three pages and is due the last day of class or May 10, 2011..

In recent years, more than twenty major American companies have left the United States and moved overseas to take advantage of lower tax rates, taking with them jobs and investments (Allen, D). The recent surge of interest in United States corporate inversions has triggered calls for Congress to put an end to the practice. A corporate inversion is when an American company merges with a foreign business and moves the combined business’s headquarters to the foreign country. Inversions are a problem because they are a symptom of a broken tax system that is hurting the United States economy. Furthermore, with the strict laws concerning inversions, some companies opt to direct profits to their foreign subsidiaries to take advantage of lower

The main objective of many companies is to minimize their tax obligations. Jeffers (2014) discussed the reason of why companies adopt tax inversion strategies. The researcher indicated that the income maximization is a major reason of companies attempting to reduce their tax liability (pp. 100-101). Tax inversion strategies provide companies an advantage to lower income tax rate. Today, U.S. corporations renounce its U.S. citizenship and move to low-tax countries. Companies that reincorporate oversees are not obligated to pay U.S. taxes on earning income (p. 99). Many countries implement tax competition strategies to attract and retain businesses. Well-known companies, such as Exxon Mobil, Hewlett Packard, Tyco, General Electric, PepsiCo, etc. take benefits of tax shelter opportunities overseas (p. 102). Other benefits of the jurisdiction abroad are flexible banking laws and simplified litigation processes.

A Tax Inversion is a business transaction in which a company, typically residing in the U.S., merges with a foreign company and moves its corporate headquarters overseas while maintaining its main operations in the U.S. for strategic purposes; specifically to take advantage of the lower tax rules in the foreign country. Even though, this practice has progressively increased in the last two decades, Congress is not so enthusiastic with the idea of corporations trying to avoid a

* For the corporation that has acquired another company, merged with another company, or been acquired by another company, evaluate the strategy that led to the merger or acquisition to determine whether or not this merger or acquisition was a wise choice. Justify your opinion.

➢ Taxation – firms functioning when dealing with a different country the subject to that country’s laws and regulations.

Question 1 Several factors have been proposed as providing a rationale for mergers. Among the more prominent ones are (1) tax considerations, (2) diversification, (3)

Americans may ponder the thought of struggling economy barely gaining momentum while corporations have witnessed some of the largest quarterly profits ever recorded. The driving force behind the extreme profits gained by many corporations is simply put as tax inversion. Tax inversion is nothing more than an American firm combining with a foreign firm in a country with beneficial and lucrative tax laws (Financial Times, 2014). The American headquarters will now be moved to the new foreign firm where they will enjoy the lower taxes and evade the taxation of the United States government (Financial Times, 2014). More and more American firms have been taking advantage of inversion while still being able to enjoy sales in the American market.

Mergers. Acquisitions. Mega-mergers. Recent years in healthcare have witnessed some of the biggest companies acquiring one another at alarming rates. However, the Wall Street Journal released an article at the end of October that has everyone talking - one of the largest owners of drugstores in the United States is considering buying one of the largest health insurers in the United States. That is right, CVS Health might be purchasing Aetna for approximately $66 billion.

As this is an international transfer, there are even more considerations that become relevant. For example, the corporate tax rate applied in North American versus Europe should be considered. Furthermore, management should look

The recent introduction of the hybrid entities has shielded the foreign firms from paying their appropriate taxes through the shielding of the taxable income and through using the foreign tax amounts on the other incomes (Messina, 2015). In this regard, only minimal taxes are remitted from the revenue generated by the local firms. Besides, people tend to evade tax charged on dividends and interests by not giving honest reports pertaining to the revenue generated abroad. Furthermore, individuals evade the taxes through transferring their funds to foreign accounts. Fortunately, the IRS can address the issue of tax evasion by changing the existing tax laws to remove the deductions and other restrictions, for instance, the foreign tax credits. Besides, it is vital to impose restrictions to curb tax evasion at a personal level through the desired policies of better information reporting and tougher penalties for the

In 1954, Alpha Plastics was founded near Manchester. And by the mid 1969’s, the company had developed into a medium-sized company with around 6,000 employees. The company was famous for developing and manufacturing a wide range of laminates and industrial adhesives. Also, it had explored the market in synthetic fibre manufacture by take-over. In 1988, Alpha Plastics involved in merger with the Colmar Chemical Company, which is a slightly larger organisation with 8,500 employees and located near Stockport. Colmar produces a variety of industrial chemicals besides plastic and specialises in the production of synthetic fibres. Alpha Plastics believed that the merger would allow taking advantage of