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Update: Globalization, not inversion, is goal of Medtronic deal

We will take a short break in our series of blog posts about trademark registration and infringement to cover a development in the deal between medical device companies Medtronic and Covidien.

In our post published on June 19, many observers attributed the merger of Massachusetts-based Covidien and Medtronic to a larger strategy aimed at tax inversion. Simply put, immediately after Medtronic's decision to purchase the other company was announced, many assumed the accompanying relocation to Ireland was simply to operate under a lower corporate tax rate.

A closer look, however, shows that the initial analysis of the deal may not be on point.

In light of the major announcement, Medtronic's CEO has indicated that the deal was more about a broader business strategy designed to adjust to a globalizing and shifting marketplace. This might make more sense, as a plan exclusively deisnged for tax inversion could draw public and government scrutiny.

A report from the Star Tribune points out that Covidien and Medtronic are not the likeliest of business companions at first glance. Medtronic is known for developing complex devices, such as Pacemakers, whereas Covidien is better known for devleoping surgical staples and other simple medical instruments. However, Medtronic has realized that medical institutions are much less likely to continue to spend more money on expensive new device models. As such, Medtronic is looking to expand their portfolio of medical devices.

Additionally, Medtronic is looking to become a more important player on a global scale. Relocating headquarters to Europe is part of this strategy. This means becoming a company that meets the needs of public and medical institutions across the globe.

When working through the terms of a business sale -- or even as a business is newly formed -- working through strategy is incredibly important. As such, it follows that the terms of a deal and place of incorporation are integral pieces of the broader conversation about intelligent business planning.

Source: Star Tribune, "Global strategy, not taxes, drove Medtronic's merger with Covidien," Lee Schafer, July 5, 2014

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