Is This the End of the Rush to Inversions?

On Tuesday, drugmakers Pfizer and Allergan announced that the two companies terminated their $160 billion merger agreement. The deal would have moved US-based Pfizer’s headquarters to Ireland, where corporate tax rates are lower. New Treasury rules aimed at limiting corporate inversions were introduced just a day prior.

(chart courtesy of Graphiq)

Alan Murray writes in Fortune:

Is this regulatory overreach by the Obama administration? Probably. Is it a ham-handed way of dealing with the controversy? Certainly. Is the real problem a U.S. corporate tax system in desperate need of reform? Most definitely.

But the Pfizer board should have seen this coming.

When the deal was announced last November, I wrote in CEO Daily that this “won’t end well, for the company or the country.” While the deal is now over, the ramifications aren’t. The populist rage stoked by the actions of companies like Pfizer – or its price-gouging cousin, Valeant – are roiling this year’s Presidential politics. Their effects will be felt for some time to come.

The lesson is clear. Big public companies need the goodwill of the public to survive and thrive. Companies that forget that pay a price – and exact a heavy toll on others.

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