Cross-Border Deal Making – Where the Buyers Are Coming From
One of the key concepts we cover in our weekly M&A conferences relates to cross-border M&A activity. Most business owners are surprised to learn how active buyers from other countries are. The fact is outward bound buyers are quite active.
Last month both The Wall Street Journal and The Economist published articles highlighting how active one country has become this year in outbound M&A. I bet many of you are assuming that the article discussed Chinese or Indian companies and their M&A activities. But that assumption is incorrect.
As it turns out, in 2011 Japan was one of the most active outbound M&A participants in the world. This can be clearly seen in the following chart from Dealogic, which tracks cross border deals by the location of the acquirers through November of last year:
Cross-Border Deal Making Activity – Through November 2011
Source: Dealogic
Obviously the U.S., being the world’s largest economy, is the most active cross-border country in the world. But note how active other countries have been in 2011, especially Japan, which ranked 10th last year and has actually spent more money on cross-border acquisitions than China and even Germany.
According to the Economist, Japanese cross border activity in 2011 eclipsed their previous record of $75 billion worth of offshore companies acquired in 2008 (through November, Japanese companies had spent $80 billion on cross-border deals).
Why So Active?
So why were the Japanese so active in buying offshore companies last year? Certainly the strength of the yen in relation to other currencies plays a key role. The yen has appreciated by 45% against the dollar over the last four years and is 35% higher against the euro over the past five years.
However, a real factor driving this growth is the fact that Japanese companies are sitting on, according to the Economist, over 60 trillion yen right now. This combined with the fact that organic economic growth is tepid at best in Japan, cross-border deal making is the most viable avenue for Japanese companies to grow.
Doesn’t that seem similar to the situation in the U.S.? As we have examined in the past, according to multiple sources, strategic players in the U.S. are sitting on over $2 trillion in cash. Given that the economy in the U.S. is projected to grow between 1-2% for the foreseeable future, the fastest way for U.S. firms to grow will be via acquisitions. With many of the economies of Europe in recession or worse, U.S. acquisition targets should be very attractive to not only U.S. based companies but also to off-shore buyers as well.
If you would like to learn more about why offshore buyers are active and what they are looking for, I would invite you to attend one of Generational Equity’s M&A conferences. While there you will learn a significant amount about how and when to exit your business for the most profit. We also discuss how to attract optimal buyers for your company and how to skillfully negotiate and close your deal.
By clicking here you will be contacted by one of our M&A professionals who can determine if our conference and services would be a good fit for your company. The important thing to keep in mind is this: With offshore activity heating up, and U.S.-based companies needing to invest significant amounts of capital, the next few years may provide you the best opportunity to exit your company in years. Don’t let it pass you by.
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