Inversion mergers, where large U.S. companies purchase smaller foreign firms and relocate overseas to avoid local tax rates, has been a hot topic in recent months, with President Obama publicly condemning the move as unpatriotic. Corporate America feels it’s just good business sense. M&A bankers are likely watching the battle closely. The practice has been helping to line their pockets all year.
Cross border activity has represented roughly 40% of total M&A value year-to-date, according to a report from Financial News. For the two largest U.S. M&A advisors – Goldman Sachs and Morgan Stanley – cross border deals have made up more than 50% of their transactions. That’s well up from last year, when international deals made up just around one-third of their activity.
Inversion mergers have no doubt played a major role in the cross border M&A boon. Since 2013, at least 15 companies have announced plans to purchase a foreign company and then change their domicile to avoid U.S. taxes, according to Thompson Reuters. That number increased on Tuesday, when Burger King spent $11.4 billion to purchase Canadian restaurant chain Tim Hortons. The company plans to relocate up north.
The current environment sets up perfectly for M&A advisors. Tax inversions not only encourage activity, they also spur fairly large deals. For an inversion to work, a U.S. company must buy a firm that’s at least 20% its size.
But the future of the practice is certainly being jeopardized. The Obama administration is reportedly gearing up options to help stem tax inversions. Even his comments have had an effect, despite the Burger King deal. Before Tuesday, no company had announced an inversion deal since July 24, the day Obama shamed such firms as “corporate deserters.”
We’ll have to wait and see if the Burger Kind deal will embolden other companies to follow suit or if political pressure will dry up deals that are likely already in the works. You can take an educated guess at which side Wall Street is on.
Bain’s New Recruiting Strategy (eFinancialCareers)
The world’s top ranked advisory firm wants to broaden its recruiting reach beyond those that feel destined to be consultants.
15 Firms That Are Hiring (eFinancialCareers)
Now that the traditional summer lull is drawing to a close in the financial sector, it’s worth considering where the job options will lie for the remainder of the year. Here’s our pick of the firms most likely to be hiring.
Billion, With a B (WSJ)
How good of a trader was Chris Rokos, who is contesting his five-year non-compete agreement with his former employer, Brevan Howard Asset Management? He personally booked yearly trading profits of over $1 billion twice during his tenure, according to court documents.
PR Exec Arrested for Insider Trading (Business Insider)
Michael A. Lucarelli, the director of market intelligence at Wall Street investor relations firm Lippert Heilshorn & Associates, has been arrested and charged with insider trading. It sounded pretty straightforward. He would buy stock in companies mentioned in press releases that he was crafting, and then sell them after the releases went out.
Legal Poaching (Reuters)
A Finra panel has sided with Morgan Stanley in an arbitration case involving Charles Schwab, which claimed the bank organized an “actionable raid” while recruiting its brokers. The panel didn’t agree, apparently.
European Fund Managers Protecting Home Court (Financial News)
U.S. fund managers dominated Europe last year, taking four of the five top spots in the European league table. The environment is much different this year, with European institutional investors preferring to keep their money at home. US firms Franklin Templeton, Pimco and M&G Investments all dropped out of the top five.
Solid Q3 For Bank of Montreal (Bloomberg)
Bank of Montreal beat analyst expectations with a strong third quarter performance. It’s investment banking division was particularly successful.
Buzz Around the Office
A White Lie (NYDN)
Police in Britain spent hours frantically searching for a man who told his girlfriend he had been kidnapped. They ended up finding him at a house party.
Quote of the Day: “I can’t get all the talent that I need if entire segments [of recruits] think the interview process doesn’t set them up to succeed,” – Keith Bevans, head of Bain’s global consultant recruiting team