Medtronic's inversion deal has already saved it more than $9 billion
- Last June, Medtronic announced that it was acquiring Covidien for $49.9 billion. The combined company focuses on pacemakers, spinal treatments, and surgical equipment.
- Since Medtronic completed acquisition of Covidien this January and moved headquarters to Dublin, the company has freed up $9.3 billion, Bloomberg reports.
- Medtronic has also committed to cost-cutting as part of the integration. The goal is to cut $850 million by 2018. So far, it has cut 40% of the target goal for this year, which is in the $300 million to $350 million range.
There's a lot that goes into any large-scale acquisition and subsequent integration—and this wasn't just any acquisition. In fact, it was the largest acquisition to date, excluding the Pfizer-Allergan deal, which is set to close during the second half of 2016 if clears regulatory muster.
By definition, the goal of an inversion deal is to obtain a more favorable corporate tax rate. This is exactly what Medtronic did, so that now it is subject not to the 35% rate in the U.S., but the 12.5% rate in Ireland.
There are still myriad challenges. According to the CEO, Omar Ishrak, Medtronic still has 40% of its cash trapped abroad, according to a report from Bloomberg. Nonetheless, things are moving in the right direction as the integration continues.
In addition to eliminating 80 duplicate sites, Medtronic has also obtained additional savings from vendors by leveraging its considerable size and also by integrating both companies' operating systems. Now, it's a question of finalizing other integration-related issues in order to benefit from a better tax rate and the many synergies that the two companies have now that they are merged.