Because Beats Electronics has tax residency in Ireland, Apple could structure a deal with the headphone maker in such a way that it would not only be able to use its massive international cash pile to pay for the deal, but it could also significantly reduce the final price with international tax laws, one financial expert says.
Photo via Paul Stamatiou.
Joseph Harpaz, the tax and accounting expert on the leadership team at Thomson Reuters, penned a guest column for Forbes this week in which he said the existence of Beats Electronics Holding Limited, a corporation established in Ireland in 2012, could become a key part of a potential deal with Apple. Specifically, Apple could pay for the purchase entirely with foreign funds -- money that has not been repatriated back to the U.S. at a high tax rate.
"M&A decisions are increasingly being driven by offshore tax policy," Harpaz wrote. "It's hard to argue the business logic of using offshore income to acquire foreign companies versus bringing the money back into the U.S. for a domestic acquisition."
Using what he admitted is "the rough math of a foreign acquisition," Harpaz said that Apple's rumored $3.2 billion bid for Beats could actually come in around $2 billion if the transaction were to be completed in Ireland. His calculations, however, seem to presume that Apple would opt to repatriate that cash for a U.S. deal.