Business Irish

Monday 22 April 2019

Dublin's law firms set for bonanza from tax inversions

Soyoung Kim and Olivia Oran look at how a small number of Irish law firms are set to benefit from the inversion frenzy

OBAMA: Spoke out last week about corporate tax tourism
OBAMA: Spoke out last week about corporate tax tourism

Soyoung Kim and Olivia Oran

Dublin law firms are set to benefit from the flurry of corporate deals involving US companies.

At least three Irish law firms are pitching low corporate taxes here to prospective US clients, seeking to tap into the tax inversion frenzy that has seized corporate America in recent months.

Arthur Cox, A&L Goodbody, and Matheson are among those pitching in the US.

Although it is not clear how large the fees are for the inversion services offered by these firms, at least some of them appear to be having a bumper year.

The marketing comes despite the chorus of voices calling for an end to such financial engineering grows louder in Washington.

Most of the big New York firms also do not have offices in Ireland. American firms prefer to partner with local firms on inversion deals not only for their specific legal and tax expertise in a particular country, but also because they're not directly competing with them, sources said.

A number of the European firms stressed that they have offices in the US and regularly visit US law firms to discuss various transactions, not just inversions.

"M&A is one of a number of important areas for us and inversion work is part of that, but we are a full service law firm," says Conor Hurley, partner and head of tax at Arthur Cox.

"Interest in US-UK M&A has been high for a number of months... The UK is increasingly regarded as an attractive environment for business, not only for tax reasons," says Andy Ryde, head of Slaughter and May's corporate practice in London.

Chris Warner, head of NautaDutilh's tax practice in Amsterdam, said: "There is perhaps a little more activity in this area [inversions] now and more reasons to talk to each other about what's going on in the marketplace."

A spokesperson for Stibbe said the Dutch firm has had a New York office for almost 30 years to serve its clients and is not focusing on inversion services in particular.

Matheson and A&L Goodbody declined to comment, while the other firms did not respond to requests for comment.

By moving their tax domiciles to lower rate jurisdictions, American companies may be able to avoid the top US corporate rate on more of their global profits. Currently many companies are holding foreign profits tax-free overseas as bringing them home means they could face a big US tax liability.

"Inversions are the topic du jour at the moment," said Patrick Cox, a tax partner at Withers in New York. "So you have law firms in jurisdictions with low tax rates coming out to say: 'You should come here, we have a sophisticated legal system, banking regime and low tax rate.'"

A&L Goodbody saw deal volumes triple from last year, thanks largely to its role in advising Minneapolis-based medical device company Medtronic on the $42.9bn takeover of Irish-domiciled Covidien.

Arthur Cox, which worked on the $1.1bn merger of US banana company Chiquita and Fyffes, has advised on $78bn worth of transactions so far this year, compared with $23bn in the same period last year.

Those deals have helped vault the firm to the 29th spot in the ranking of global M&A legal advisers, up from the 50th position in the year-ago period, according to Thomson Reuters data.

"Potentially, what's happening here is that there's a new toy out there and everyone wants a piece of it," said Adam Rosenzweig, a law professor at Washington University School of Law in St Louis.

Since 2010, about two dozen US companies have shifted their legal tax residences to lower-tax countries via corporate deals, versus the same number over the previous 25 years.

Half of the defecting companies chose Ireland for their new corporate domicile, whereas the UK and the Netherlands each attracted four and three transactions, respectively.

So far this year, nine inversion transactions have been announced, compared with four such deals in all of 2013.

Ireland saw deal volumes rise nearly six-fold in the first half of the year, accounting for a fifth of all European transactions.


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