October 28,2020

ICYMI: Insights on Trends in U.S. Cross-Border M&A Transactions after the Tax Cuts and Jobs Act

By Andrew B. Lyon
Tax Notes
Published on Monday, October 26, 2020
 
Cross border mergers and acquisitions data show that for the first time since 2013, the dollar share of outbound transactions – that is, acquisitions by U.S. companies of foreign assets and companies – exceeded inbound transactions – that is, acquisitions by foreign companies of U.S. assets and companies – in 2018 and 2019.
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The data show that U.S. companies significantly increased their acquisitions of foreign assets and companies in 2018 and 2019 relative to the historical period.  The average value of U.S. acquisitions of foreign assets and companies grew by 50 percent in those two years compared with the average of the two prior years.  Foreign acquisitions of U.S. assets and companies fell in value by 25 percent in that period.
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That increase [in U.S. acquisitions of foreign assets] is consistent with U.S. domicile being more attractive following the enactment of the TCJA.
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The decline in inbound acquisitions is also consistent with the TCJA increasing the attractiveness of the United States as the tax domicile of multinationals.
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Overall, the data are consistent with the view that the TCJA made U.S. multinational companies more competitive relative to foreign-based multinationals, as evidenced by the increased dollar value of acquisitions by U.S. companies of foreign companies.
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Background:
Last month, Senate Finance Committee Chairman Chuck Grassley (R-Iowa) made the case that Former Vice President Biden’s tax plan is bad for American businesses in a statement on the Senate floor. As part of his critique, Grassley illustrated that, unlike Biden’s antiquated proposals, “the Tax Cuts and Jobs Act made this country a more attractive place for businesses to headquarter, invest and create jobs.”  His full speech can be found HERE.
 
Now there’s even more data supporting Grassley’s statement that, “tax reform stemmed the flood of offshoring, while encouraging U.S. companies to invest here.” According to a new study by PwC, “the data support the notion that the 2017 tax reform legislation improved the attractiveness of the United States as the tax domicile for multinational enterprises.”