Shire will receive a $1.6 billion termination fee if the deal falls through - substantially higher than the $139 million average termination fee payable by acquirer so far in 2014, according to Dealogic.
One of the biggest reasons for inversion deals is that some U.S. companies have built up hefty overseas cash piles, which would be taxed both in the market they were earned, and in the U.S. if they were brought back for tax purposes. However, if they use the cash to buy an overseas company and move their tax headquarters overseas, this might yield greater returns than simply leaving it.
"When you're making 20 basis points on cash, does it really matter how low a return you get (from a deal)?" Smead asked. "The biggest thing is, can that cash get used?"
The U.S. government announced measures to crack down on tax inversion in September, after a wave of mergers and acquisitions this year, particularly in the pharmaceuticals sector, were partly motivated by tax reasons. U.S. behemoths from Burger King to Pfizer are trying to cut down their tax bill by moving their headquarters overseas.