Tax avoiders, keep ‘em coming
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Tax avoiders, keep ‘em coming

You might admire Obama’s clampdown on tax inversion, but if you are a loan banker starved of dealflow, you won’t thank him for it.

The loan market is tightening its belt as it battles record low EMEA volumes this year. Volumes are down 55% year to date and the outlook is far from rosy.

In recent months, a number of heads of loans have moved on, and in some cases their roles are being filled by staff taking on extra responsibilities to cut costs.

The low volumes are largely driven by the lack of refinancings which means that event-driven activity is now critical.

But there is a shadow looming over M&A activity and that is the US government's clampdown on tax inversion.

In the past US tax inversion M&A — where a company acquires another to take advantage of a lower corporate tax rate — has been a boon for the loan market, especially in the pharmaceuticals sector.

Billion dollar deals — such as Allergan’s $65.7bn acquisition of Actavis, or Medtronic's $46.8bn takover of Covidien — have sprung from companies seeking lower tax bills.

In February, Barclays and Morgan Stanley underwrote an $18bn bridge facility for Shire's acquisition of Baxalta. While Shire has said its deal was not structured as an inversion, the full impact of the change of tax law is not known and it might damage the tie-up.

Only this month, US-based Pfizer pulled its $160bn deal to buy Ireland-headquartered Allergan, which would have created the world's largest drugmaker.

While you may be sympathetic to America’s moral cause, if you want a healthy loan market, you should be shaking your fist. 

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