Corporate Inversions: Stanley Works and the Lure of Tax Havens

Posted: 10 Nov 2005

See all articles by Mihir A. Desai

Mihir A. Desai

Harvard Business School - Finance Unit; National Bureau of Economic Research (NBER)

Mark F. Veblen

affiliation not provided to SSRN

Kathleen Lulchs

affiliation not provided to SSRN

Abstract

SUBJECT AREAS: Accounting, Corporate control, Financial management, Financial statements, Financial strategy, International finance, Mergers & Acquisitions, Taxation, Valuation

CASE SETTINGS: United States; Industrial goods; $2,264 million revenues; 15,000 employees; 2002

In response to Stanley Work's announcement that it is moving to Bermuda - and the associated jump in market value - a major competitor sets out to determine how the market is valuing the consequences of moving to a tax haven and whether his company should invert to a tax haven. In particular, the competitor's CFO needs to attribute Stanley's stock price movements across several dimensions of potential tax savings (tax savings on foreign operations and on interest payments) to see if there might be something else at play (earnings stripping). In the process, the mechanics and incentives created by the international tax regime are illustrated.

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Suggested Citation

Desai, Mihir A. and Veblen, Mark F. and Lulchs, Kathleen, Corporate Inversions: Stanley Works and the Lure of Tax Havens. HBS Publishing Case No.: 9-203-008; Teaching Note No.: 5-206-013. Available at SSRN: https://ssrn.com/abstract=845514

Mihir A. Desai (Contact Author)

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6693 (Phone)
617-496-6592 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Mark F. Veblen

affiliation not provided to SSRN

No Address Available

Kathleen Lulchs

affiliation not provided to SSRN

No Address Available

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