This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

What's with all the healthcare and pharmaceutical mergers?

James Dennin, Kapitall: Last Tuesday alone saw the announcement of $74 billion in potential healthcare and pharmaceutical mergers. In one day. 

Corporate inversion is the practice of buying another company so that you can relocate. Typically, inversion involves a larger "parent" company and a smaller acquisition target located somewhere with low corporate taxes, like Ireland. 

Read more from Kapitall: Celebrate International Workers’ Day with these profitable, employee friendly companies

That's because American companies are required to have at least 30% of their assets located overseas before they can be considered "headquartered there." When you buy an entire company, that threshold is usually pretty easy to hit, and you also get to benefit from saving on reduced competition and taxes. 

This is in part what's explaining all of the healthcare merger and acquisition activity that's been going on all year, particularly among drug makers. 

A lot of the biggest drug manufacturers, like Pfizer (PFE), have seen their costs go up in the last year. Part of it has to do with pressure from insurance companies to provide cheaper drugs. And part of it has to do with expiring patents on major blockbusters like Viagra. 

That, and the mountains of corporate cash that have been burning a hole in these company's pockets. The pharmaceutical industry has been spending money with particular fervor; a single day last week saw $74 billion in merger activity alone. 

The latest merger talk in pharmaceutical circles is Pfizer's pursuit of the British drug maker Astra Zeneca (AZN). The latter seems reluctant to be acquired, but Pfizer has been aggressive in its pursuit, despite a long-standing history as one of America's oldest companies. 

And yet there could also be another reason to account for the huge spike in activity. Congress is in the process of considering raising the amount of assets a US companies needs to maintain overseas from 30% to 50%, making inversion significantly less attractive. 

Besides, there are only so many attractive acquisition targets located in tax havens anyway. It certainly begs the question of whether pressure will prompt firms into overpaying.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,553.16 -10.14 -0.06%
S&P 500 1,932.89 +2.22 0.12%
NASDAQ 4,380.3630 +10.59 0.24%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs