1. Finance in the News
Megan Findakly, Hanna Cohen, Ayomide Oluleye, AJ Ajiboye
April 4, 2016

2. Article
Title: “IHS becomes latest company to give up
U.S. citizenship for lower taxes”
Source:
Date: March 21, 2016

3. Objectives
1.Who is IHS?
2.What is inversion?
3.What are the implications of inversion?
4.How does inversion affect cost of capital?

4. Who is IHS?
• Began in 1959.
• IHS provides information and analysis to support the decision-
making process of businesses and governments
• Industries: Aerospace, Chemical, Defense and Security,
Economics & Country Risk, Energy, and Technology
• Key Acquisitions: Global Insight, Polk and Carfax, Jane’s
Information Group, RootsMetric

5. Financial Picture
• Fiscal year 2015
– $3.3 billion in revenue
– $1.2 billion in adjusted earnings before interest, taxes
depreciation and amortization (EBITDA)
– $800 million in free cash flow
• Credit Rating
– S&P: B++ and stable
– Fitch: BBB and stable
– Moody's: Ba1

6. IHS and Markit to Merge
• Markit is a leading global provider of financial information
services.

7. What is inversion?

8. What is inversion?

9. What is inversion?

10. What is inversion?
2002: Congress enacts
moratorium on
inversions, then new law
meant to stop them
2009: Companies
begin to exploit
exceptions in new law

11. What are the implications of
inversion?
Source: Bloomberg

12. What are the implications of
inversion?
Source: Google Source: Google

13. How do inversions affect WACC?

14. How do inversions affect WACC?

15. How do inversions affect WACC?
Weighted
Average
Cost of
Capital

16. How do inversions affect WACC?
vs.

17. Takeaways
• Inversion is when a US company buys or merges
with a foreign company to reduce its tax burden
• The implication are positive on both shareholders
and the company’s stock
• Earnings strippings improves its WACC, and lowers
its taxable income

18. Discussion Questions
1.If you are already invested into IHS, how
would you feel about this inversion deal?
2.Does IHS have an obligation to shareholders
to limit its tax burden?

19. Bibliography
Hiltzik, Michael. Los Angeles Times. Los Angeles Times, 8 July 2014. Web. 03 Apr. 2016.
<http://www.latimes.com/business/hiltzik/la-fi-mh-corporate-tax-scam-20140708-column.html>.
Merle, Renae. "IHS Becomes Latest Company to Give up U.S. Citizenship for Lower Taxes." Washington
Post. The Washington Post, 21 Mar. 2016. Web. 03 Apr. 2016.
<https://www.washingtonpost.com/news/business/wp/2016/03/21/data-company-ihs-becomes-latest-
to-give-up-u-s-citizenship-for-lower-taxes/>.
Raice, Shayndi. "How Tax Inversions Became the Hottest Trend in M&A." WSJ. 05 Aug. 2014. Web. 03
Apr. 2016. <http://www.wsj.com/articles/how-tax-inversions-became-the-hottest-trend-in-m-a-
1407240175>.
"IHS and Markit to Merge, Creating a Global Leader in Critical Information, Analytics and Solutions." IHS
Newsroom. Web. 3 Apr. 2016.