BUYER PROFILES
Where do all these buyers come from? Companies from developed countries in Canada and Europe have historically been the most aggressive buyers of U.S. companies and sourced 69% of deals last year, according to Capital IQ.
Asian companies have stepped up their purchases, especially those in emerging economies such as India and China. Asia’s emerging companies have initiated 23 takeovers so far in 2008 and 62 in 2007, nearly double the 2006 total and more than four times that of 2005. But Asia’s emerging companies, which tend to focus more on growth within their own borders, account for a small portion of buyers.
Foreign purchases of U.S. companies could pick up speed if concerns ease the credit crunch and weak U.S. economy . “They want to look before jumping,” Ritch said.
US financial firms that saw their market values reduced last year are among the companies that could potentially attract foreign interest, bankers say. “But buyers just don’t want to own these kinds of distressed companies right now,” Harris says, “because they don’t really know when these companies are going to bottom out.”
Potential buyers buy into the safer and more stable parts of the US economy. “We’re seeing a lot of movement around companies with good growth quality,” says Harris, who notes that companies in the energy sector are preferred takeover targets.
POLITICAL ASPECTS
One thing that is unclear is how much politics will affect the pace of US buyouts. In 2006, DP World, owned by the United Arab Emirates, was blocked in its efforts to buy the management of several American ports, with critics citing national security concerns. But between then and the announcement of InBev’s takeover bid for Anheuser, some concerns had been raised about takeovers of US companies. Although there was an emotional reaction to see a major American brand such as Budweiser end up in foreign hands, the takeover of the Anheuser brewery had to be approved.
Usually, US shareholders raise a glass to takeover proposals — wherever they come from — because it drives stock prices higher. “In addition, employees and their unions sometimes prefer foreign investors,” adds LaRocca. “Buyers often have a long-term view, which makes them more inclined to invest in the development of the business,” he says.
The 2008 presidential election and a new government could change the climate. Until then, like the cheap US dollar, foreign buyouts will be another reminder that US economic growth still lags much of the rest of the world.
