In a single day last week, $40 billion worth of deals were
announced in the pharmaceutical industry. The jaw-dropping,
combined value of the announced mergers and acquisitions has turned
heads, and has prompted analysts to question the impetus behind these
The increased activity may come as a surprise to some, as recent changes by the Obama administration
have been aimed at limiting inversions – a type of merger in
which a company (often American) buys a foreign counterpart, and
then moves abroad to lower its taxes. These rules put an end
to what would have been the largest inversion to date, a $150
billion takeover in the pharmaceutical industry.
In spite of these changes, which go beyond just targeting
inversions but also attempt to dissuade a tactic known as earnings stripping, deals worth nearly $60
billion were announced in the health sector last week. While
not all of these transactions will be successful, and in fact one
takeover bid worth nearly $10 billion has already been rejected, the activity suggests pharmaceutical
companies see size as a significant factor in their ability to
compete – bigger equals better.
Though $40 billion worth of deals in one day may be coincidence,
data compiled by Thomson Reuters suggests that
Thursday's deals were part of the busiest period since June
2015. Analysts have suggested that the motivation for these deals
may be the need for more bargaining power when negotiating deals
with hospitals and insurance companies, which can be achieved when
a company merges with another leading producers of the same product
line. There are also new U.S. rules which require bundling
health services: smaller less diversified companies simply
won't be able to provide bundled services. Another
possible explanation is that pharmaceutical companies are trying to
replace older products whose sales are declining by acquiring
growing, specialized firms. While the exact motivation for
last week's deals may not be known, it does not seem like there
will be any shortage of mergers in the pharmaceutical industry in
the near future.
The author would like to thank Rayomond Dinshaw, articling
student, for his assistance in preparing this legal
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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