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Breakingviews: Runaway M&A

Wednesday, July 02, 2014 - 03:29

Antony Currie and Breakingviews columnists explain how tax-arbitrage merger deals may end up being all for nothing – and how deal-making could hit $4.5 trln next year.

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And I bankers can look full it's really found some they have had their best starts of the year since 2007. One point eight trillion deals that -- -- they announced this year. Fantastic for them fantastic the banks from -- even the new book so one of the biggest -- -- -- love these so called in version deals yet witnesses companies by an overseas company and they put their tax -- they start dying UK tax -- -- batteries -- -- or some other from a country. And it seems at least deals happen happening in health -- and health -- than any amount of health care deals in the first happened here are greater than any entire year. Ever bright that's this gigantic number of deals and there are tons more coming and the I've I've talked to bankers yeah. That the unsurprisingly backed as a loving it and get back and letting it the. I'll visit these deals could amount to nothing really I mean because. The wanted didn't get dog -- are trying to by AstraZeneca which was a hundred billion dollar -- -- back from more than. Drew the attention of the US congress. And sort of spurred some momentum a little bit at least. For tax reform -- United States and if the momentum builds for that. As more and even the more versions ago proposed the more likely. Right you know the US government saved way to marry can't move overseas and a -- the hope did give unease these conversions is that. He just -- place I think you put it it's also on some of the best right you can you can -- more moment I don't -- at least -- tax domestic cash tax -- brings some cash tax if you include some of -- -- -- -- and it also supposed to help bring money back into the United States there's also. Come to an onerous tax rate. If all of -- changed in say three years' time once you have this kind of -- new congress -- the president even. You know ultimately. These -- the benefits of these deals quickly erode now you're stuck with a partner that really has no. Genuine strategic sense that -- sabathia AJ immediately people are -- and if your happiness of these deals being done purely attack that is nice to teach you look you can at least -- -- All of them. Executives go to great -- it explains strategic merits but if you look at the -- -- really don't. Stamp you know seeing companies buying companies that don't are even in the same sector. You're seeing companies saying goes no actual savings here around -- -- -- right and that -- him -- editors and you're just to be a person's. Our -- -- to the London took a quick look at at the -- more broadly. And I had an instinct take on it which was that even though it happens one point eight trillion. We could easily get to over four trillion by next year if you're fortunate a year it was so fortunately here if you think about it in the context purely of the number of the volume of the day as a percentage of market capitals Russian globally. If traditionally has averaged around 7% over the last thirty Bryant right now about five and a half percent if you think about little the stock market gains. And -- revert to that historical sort of average. You get to four and a half trillion by the next yourself one point eight trillion looks huge. But we could have a lot more ago puts on a sound like -- overnight bank is yes because the best seasonal -- -- even if congressman has changed tackles on inventions they can just cancel out the breakups all the banks fill fully the company's planned -- worked for the next. Jeff Rowe thanks very much and will be back for more breaking -- tomorrow.

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Breakingviews: Runaway M&A

Wednesday, July 02, 2014 - 03:29