Why So Many U.S. Firms Are Buying Smaller Competitors Abroad (Hint: Think Taxes)

A generic drug maker based in Pittsburgh has become the latest American company to undergo an “inversion”: By buying a smaller company abroad—in the Netherlands, in this case—Mylan will be able to incorporate outside the U.S. and pay lower taxes, according to The New York Times. In the past two years, nearly 20 large firms have announced similar plans. Although Mylan says its merger is driven mostly by strategic considerations, the tax benefits are large: The company’s effective tax rate on its operations abroad would decline from 25% to 21% in the first year, then to the high teens after three to five years.