Foreign Concept
April 23, 2008
At least on paper, the conditions for foreign buyers interested in U.S. targets couldn’t be more auspicious. The dollar is weak, M&A financing is harder to come by for financial sponsors, and many strategic buyers in the States are hard-pressed to make acquisitions at a time when earnings targets are being missed.
Since last fall, mid-market bankers have been telling me about increased demand from Europe, in particular, whose strategics and private equity firms are participating in more and more auctions of U.S. companies. That trend helps to explain why mid-market banks like Brown Gibbons & Lang, Lincoln International and several others have been staffing up overseas.
I would guess that most companies would ultimately be willing to sell to a foreign buyer if the price is right and they feel the asset is being left in good hands. But for smaller companies, in particular, the concept of selling to a buyer in Europe or Asia can still be unnerving. Just today, an American friend of mine who works for a German bank shared a story about a client of his in St. Louis who was reluctant to work with a foreign entity—despite the fact that this bank has been in the U.S. for decades.
These fears, however unfounded they may be, are only reinforced by all the talk about sovereign wealth funds invading American soil. That’s a topic for another column, but I’m guessing most readers of this column would agree that much of the mainstream commentary and press (i.e., the recent 60 Minutes interview with China’s SWF chief) has been negative and perhaps short-sided.
I’m interested in hearing from some of you about this issue. How often does resistance to foreign buyers quickly fade when the price is right? And for you M&A advisors, in particular, how do you deal with that hesitancy when it crops up? Let me know what you think at adam.reinebach@sourcemedia.com
Adam Reinebach
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