Red, White & Blue Plate Special: Foreign M&A Surges in U.S.

November 27, 2007, 3:59 pm
Posted by Dana Cimilluca, Deal Journal - WSJ.com:
The Redcoats are coming — again.
The weapon of choice in this British invasion, however, is money, not muskets, and the targets are companies, not rebels. U.K. companies have struck $46 billion of acquisition deals in the U.S. this year, more than any other country, according to Dealogic. That compares with just $34 billion in all of last year (when our former parent country ranked third after Canada and France.)
The Brits aren’t alone this year, however. Since the global merger boom began in around 2003, there has been a steady increase in the percentage of U.S. acquisitions made by foreign companies. Their share of such deals has increased to 20%, from 11% then, according to Dealogic. Even as the M&A engine in the U.S. sputters along with instability in the credit markets, foreigners keep snapping up U.S. assets, as highlighted by the Abu Dhabi Investment Authority’s surprise $7.5 billion investment in Citigroup.
What draws these overseas neighbors to our shores? The overflowing coffers of the state investment funds in countries including China and Abu Dhabi are part of it. The sharp decline in the U.S. dollar can’t hurt either, as it reduces the cost of U.S. deals for acquirers using euros, pounds or yuan.
Of course, given the fickle nature of the U.S. dollar and oil prices — whose marked movements have helped shift the M&A landscape — there is no guarantee they are here to stay. After all, in 2000, foreign deals accounted for 22% of all U.S. M&A, only to fall to 11% three years later as the tech bubble sent foreigners scurrying like the British after Yorktown.