Overseas Investors See Value in US Middle-Market Businesses
In an earlier blog, I made the suggestion to look beyond our borders for possible acquisition targets, specifically in Brazil, where capital from the US as well as from European and Asian nations had been flowing at increasing rates over the recent years. This time, I would like to call your attention to the opposite phenomenon, one that has already been tagged by some investment bankers as a type of “reverse colonialism”.
While the economies of the developed world are still weak after the 2008 banking crisis in the US and the debt crisis that started in Europe in 2010, the emerging economies have been thriving, blessed with a continuous rise in commodity prices and their surprisingly sound fiscal condition. This has created an unusual appetite for acquisition in the US and Europe by investors from countries such as Brazil, India, or Mexico among others. In fact, according to the World Bank the US and Britain alone were the destination of over $320 billion in emerging-market acquisitions between 2000 and 2010.
The underlying reasons for this unexpected flow of capital represent great opportunities for business owners especially in the US. Far from seeking to “buy cheap” as the simplistic view would suggest, these investors are looking for three things that they know they can’t easily get elsewhere:
• a market economy where the rule of law works and foreign investment is welcome
• technical know-how or strong brands that they can export back to the fast-growing emerging world
• the global-player status that comes with establishing a footprint in what is clearly still considered the jewel of all markets
Manufacturers and technical service providers stay alert, for this trend will continue in particular in these areas. In fact it will intensify as the success of the new conglomerates entices middle market investors from the emerging economies to explore opportunities beyond their borders. So, when considering the sale of their businesses, owners in the US should keep their options open and make sure that their search for prospective buyers is not bound by the national boundaries.