The business world welcomed news of Pfizer’s plans to acquire Allergen in a $160 billion deal. ((Ransdell Pierson & Bill Berkrot, Pfizer to Buy Allergan in $160 Billion Deal, Reuters, Nov. 24, 2015, http://www.reuters.com/article/us-allergan-m-a-pfizer-idUSKBN0TB0UT20151124.)). The merger not only represents the biggest pharmaceutical merger of all time, but is also viewed as an indication that the business world is back on its feet as deal activity is surpassing all pre-recession metrics. ((Jackie Wattles & Heather Long, Pfizer and Allergan Combine in Biggest Drug Merger Ever, CNN Money, Nov. 23, 2015, http://money.cnn.com/2015/11/23/investing/pfizer-allergan-merger/.)). While many positives can be extrapolated from this deal, not everyone has greeted Pfizer’s plans with excitement. The merger has been described by some as a “disgrace,” ((Bourree Lam, Is the Pfizer-Allergan Deal ‘Unpatriotic’?, The Atlantic, Nov. 24, 2015, http://www.theatlantic.com/business/archive/2015/11/pfizer-allergan-merger-tax-haven/417492/.)) and the President of the United States has labeled this deal as unpatriotic. ((Carolyn Johnson, Pfizer and Allergan to Merge in $160 Billion Inversion, The Washington Post, Nov. 23, 2015, https://www.washingtonpost.com/news/wonk/wp/2015/11/23/pfizer-and-allergan-to-merge-in-160-billion-inversion/.)).
The reason behind the criticism is that along with announcing that it was planning on buying Allergen, Pfizer also announced that the proposed acquisition would be structured as a reverse merger which would result in a tax inversion. ((Id.)). Put simply, Pfizer plans a reincorporation of sorts to locate its corporate headquarters to Allergen’s Dublin base. ((Id.)). Reincorporating in Ireland, which has the second lowest corporate tax rate behind Switzerland, would result in Pfizer saving billions in tax dollars over the next couple of years. ((Bourree Lam, Is the Pfizer-Allergan Deal ‘Unpatriotic’?, The Atlantic, Nov. 24, 2015, http://www.theatlantic.com/business/archive/2015/11/pfizer-allergan-merger-tax-haven/417492/.)).
While Pfizer is certainly not the first company to move its corporate headquarters abroad for tax purposes, given the high profile nature of this deal it has drawn a lot of negative attention from many commentators. Even presidential hopeful Hillary Clinton has chimed in by noting that this deal “will leave U.S. taxpayers holding the bag.” ((Matthew Yglesias, The Pfizer-Allergan Merger is a Huge Tax Dodge, Vox, Nov. 23, 2015, http://www.vox.com/2015/11/23/9784956/pfizer-allergan-merger.)). There are regulations in place for the U.S. government to block the proposed merger, however, despite the strong rhetoric from government officials it seems very unlikely any attempts to block the merger will actually be implemented. (((Bourree Lam, Is the Pfizer-Allergan Deal ‘Unpatriotic’?, The Atlantic, Nov. 24, 2015, http://www.theatlantic.com/business/archive/2015/11/pfizer-allergan-merger-tax-haven/417492/.)).
This merger has brought many issues to the spot light. It has raised interesting questions about corporate tax policies in the United States, tax evasion by corporations, and the ethics behind the political and business aspects of this merger. From the perspective of corporate attorneys, this has also raised an interesting question of whether other corporations will follow in Pfizer’s footsteps. With Pfizer projecting its merger and “savings” for all to see in the business world, this has the potential to steer other major corporations to reincorporate in countries with more favorable corporate tax policies. This in turn could shape all aspects of the legal profession. Corporate attorneys on the M&A side of things are likely eager for the potential business that this merger might inspire, while more seasoned managing partners look at strategic partnerships in countries with favorable tax rates. This might even create interesting opportunities for government attorneys and lobbyist to push for tax reform to ensure U.S. corporations remain in a competitive U.S. tax market.
While it is too soon to tell what the implications of this merger are, many are keeping an eye on the market for the new trends this could potentially inspire. Pfizer’s announcement has set lots of moving parts in motion, and when the dust finally settles on both the business and government side, the landscape of M&A law may look much different than it does today.
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