BACK TO CONTENTS CASE STUDY
In 2013, US generic drug maker Actavis purchased
Warner Chilcott PLC and relocated to Dublin, cutting its corporate tax rate by more than half to 17 percent
As European fi rms make strategic moves, on the other side of the Atlantic there has also been considerable activity; companies are being more tactical. One motivation behind deals is ‘inversion,’ which provides US companies with the opportunity to reduce their effective tax rate.
Indeed, a stated reason for the biggest deal this year so far – Abbvie’s US$32 bn purchase of Ireland-based Shire – will be to deliver a reduction in tax rate although another obvious motivation is to strengthen their core product portfolios. By acquiring treatments that allow AbbVie to expand their prescence across a treatment pathway they will be able to deliver treatments to patients with severe as well as moderate disease symptoms in their core therapeutic areas.
Another trend happening on both sides of the Atlantic is the activity in the health and wellbeing space which picked up signifi cantly in the last half of 2013 and fi rst half of 2014.
© 2014 KPMG LLP, a UK limited liability partnership, and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved. Current ETR
37% 17%
Future ETR
Some example trends include both Nestlé and Unilever divesting in their weight management portfolios. This refl ected ongoing poor performance in the segment thought to be due to customer scepticism and uptake issues. There have also been several signifi cant deals by Danone down the supply chain into ingredients production, refl ecting a desire to reduce volatility and remove risk.
Overseas expansion is also on the agenda, as a number of pharma groups seek out JVs with Chinese or Indian manufacturers, to reduce production costs. This approach does, however, carry risks over quality and compliance, especially if the products are destined for markets such as the UK or US.
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DEAL CAPSULE
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