Google could spend $30bn buying foreign companies so it doesn't have to pay tax

The tech giant really doesn't want to lose 35% of its cash mountain by moving it back to the States.

by Rachel Savage
Last Updated: 14 Jul 2014

Google could soon be getting very busy buying up companies outside the US, having stocked up a mega $30bn war chest that, like Pfizer, it would really rather not bring back to the US.

The search giant wrote to the US Securities and Exchange Commission (SEC) in December to explain why it was keeping so much cash abroad – a toe-curlingly huge $34.5bn at the end of March. The short answer is avoiding the 35% tax on money US companies bring back from overseas. The long answer is that Google wants to put that mountain of dosh to work by snapping up companies.

‘It is reasonable to forecast that Google needs between $20bn to $30bn of foreign earnings to fund potential acquisitions,’ the third-person loving company wrote in the letter, which was only made public this week.

It added this was because ‘our global business has expanded into other product offerings like mobile devices’ – ironic, given it sold off Motorola to Lenovo just a few weeks later.

Google revealed it had tried and failed to buy a foreign company for $4bn-$5bn last year. It didn’t name the one that got away, but mentioned it to illustrate the size of target it was after. A deal that size would far eclipse its largest foreign deal to date – the $1bn it paid for Israeli mapping business Waze.

The company also mentioned it hoped to eventually put ads ‘on refrigerators, car dashboards, thermostats, glasses, and watches, to name just a few possibilities’. That was before it paid out $3.2bn for connected home gadgets maker Nest, whose users it assured it would ask permission to use their data. Google claimed yesterday that that terrifyingly ubiquitous idea for ads now ‘does not reflect our product roadmap’.

What is likely is the California-based company will be after more hardware businesses, given there aren’t many large internet companies left to poach outside the US. It could also set off an M&A frenzy, as it is far from the only tech giant with a big pile of cash sat doing nowt.

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