American On Sale

As highlighted in BusinessWeek, and illustrated by the recent acquisition of Anheuser-Busch by InBev, the United States is on sale. The weak stock market and even weaker U.S. dollar are allowing foreign buyers to purchase U.S. companies at discount prices. In the past five years, 2,331 U.S. firms with a total value of $772.3 billion were purchased by foreign buyers, according to data provider Capital IQ. In 2007, 614 U.S. firms, valued at $294.4 billion, were acquired by foreign entities, up from 541 deals valued at $155.1 billion for 2006, and 226 firms valued at $49.6 billion in 2003. While foreign buying slowed some with the slowing global economy in 2008, there has still been 266 foreign deals announced year-to-date valued at $121 billion.

Not surprisingly, bankers and M&A specialists expect the deals to continue and even accelerate if the dollar continues to be weak against the Euro. Foreign buyers also seem to have easier access to credit, compared to their American counterparts. Even those American companies who can obtain credit are less likely to do so given the uncertain economic environment. Who is next? It is difficult to tell, but the types of business purchased are being affected by the economy. Right now very stable businesses with good brands are being looked at. Companies similar to past and present takeovers, such as Anheuser-Busch, Genentech, Lucent Technologies, MedImmune, John Hancock, Commerce Bancorp, IPSCO, and the Thompson Corporation will be targets. If the economy were to improve, companies affected by the slowdown in the economy, and currently a little too risky given the environment, may also start to be considered, right at the point business starts to pick-up. Until the U.S. credit and housing problems are behind us, there may not be much some of these companies can do. Something to think about when you are having you next cold glass of InBev.