The Impact of IP Box Regimes on the M&A Market

60 Pages Posted: 3 Jan 2019

See all articles by Sebastien Bradley

Sebastien Bradley

Drexel University

Leslie A. Robinson

Dartmouth College - Tuck School of Business; Dartmouth College - Accounting

Martin Ruf

University of Tübingen

Date Written: December 18, 2018


IP box regimes reward ownership of successful technology by imposing a lower tax rate on income derived from the commercialization of patented products relative to other sources of business income. Coupled with explicit provisions regarding the eligibility of acquired intellectual property, IP boxes may affect merger and acquisition (M&A) incentives through multiple channels. Applying panel difference-in-differences and event study methods at the firm level, we examine the effects of these modified incentives on the probability that a firm is acquired in the context of international and domestic acquisitions. In IP box regimes with strict nexus requirements, reducing the tax rate on patent income by 1 percentage point is associated with a 2.5 percent reduction in the probability of being acquired for patent-owning firms due to the potential loss of eligibility for preferential taxation. This effect dissipates where nexus requirements are relaxed. Significant positive effects of IP box tax savings on M&A activity in the latter more permissive regimes are indicative of increased after-tax valuations of merger-driven synergies.

Keywords: IP box, tax policy, acquisition, M&A, innovation, patent

JEL Classification: K34, H25, H32

Suggested Citation

Bradley, Sebastien and Robinson, Leslie and Ruf, Martin, The Impact of IP Box Regimes on the M&A Market (December 18, 2018). Tuck School of Business Working Paper No. 3304559. Available at SSRN: or

Sebastien Bradley (Contact Author)

Drexel University ( email )

3141 Chestnut St
Philadelphia, PA 19104
United States

Leslie Robinson

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

Dartmouth College - Accounting ( email )

100 Tuck Hall
Hanover, NH 03755
United States
603-646-4018 (Phone)

Martin Ruf

University of Tübingen ( email )

Nauklerstraße 47
Tübingen, D-72076


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