Havenly Acquisitions

Burcin Col
Pace University-Lubin School of Business

Vihang R. Errunza
McGill University – Desautels Faculty of Management

May 1, 2015

Abstract:

We explore the valuation, tax and post-merger performance consequences of M&As with tax haven firms. Using an international sample of cross-border mergers over the period 1989 to 2010, we find that acquirers of tax haven firms decrease their effective tax rates significantly in two years following the M&As. The announcement returns to acquirers of tax haven firms are, on average positive but lower relative to a control sample of non-tax motivated M&As. Lower returns are associated with potential agency costs, taxpayer/consumer backlash as well as relatively poor operating and sales performance of the acquirers following these acquisitions.

Havenly Acquisitions

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