Continued merger activity around the world didn't have much of an impact on markets today, and with 30 minutes left in trading the Dow Jones Industrial Average (DJINDICES:^DJI) was down 0.07%.

Siemens and Mitsubishi teamed up to counter General Electric's (NYSE:GE) $17 billion offer for Alstom, which is now a hot commodity among industrial conglomerates. Siemens offered to pay $5.3 billion for Alstom's gas turbine business and proposed joint ventures in rail and power systems. Mitsubishi would take a 10% stake in the French conglomerate and bring more than $4 billion with it. The saga continues, and I wouldn't be shocked to see this be a contested bid all summer.  

But the bigger deal here in the U.S. is Medtronic's (NYSE:MDT) proposed acquisition of Covidien (UNKNOWN:COV.DL), which would bring together two medical device giants.

Why Medtronic has its sights on Covidien
Medtronic's offer of $35.19 in cash and 0.956 shares of ordinary stock for each Covidien share gives the deal a value of $42.9 billion before Medtronic's shares dropped today. But the reason for the deal is even more surprising than the fact that there's another proposed merger in the medical industry.

Medtronic's headquarters in Minneapolis may be a little quieter in coming years. Source: Medtronic.

Medtronic's medical device sales don't necessarily fit well strategically with Covidien's surgical materials business. So many analysts are pointing to the tax benefits of the acquisition as the key.  

Covidien's headquarters are in Ireland, and Medtronic plans to move its own headquarters there once the deal is finalized. That will free up international profit to be returned to HQ in the new country, whereas many companies keep cash abroad so they can avoid repatriation taxes in the U.S. That tax benefit was also a planned benefit of Pfizer's recent attempts to acquire British pharmaceutical AstraZeneca

The Medtronic buy could also free up cash to spend on further acquisitions and research. But before we go assuming the best for this merger, keep in mind that larger mergers or acquisitions rarely add the kind of value management expects over the long term. For that reason, it's worth looking at skeptically from Medtronic's side.

There's also the possibility that U.S. tax law is put under so much pressure that rules are changed and make the tax benefits moot. It will take years to determine if the deal is a success, but it's worth noting that taxes are now a huge consideration of major U.S. corporations, which are even willing to move abroad to save money.