Weak dollar prompts record foreign buyouts of U.S. companies
BOSTON: Foreign firms are taking advantage of the weaker dollar to buy U.S. companies at a record pace, increasing investment here but also raising fears about a potential loss of jobs and autonomy.
“We could be looking at the worlds largest tag sale if we continue to see declines in the dollar,” said Donald Klepper-Smith, the chief economist at DataCore Partners.
Nationally, the value of purchases of companies by non-U.S. buyers so far this year totaled $257.4 billion - more than in any full year since 2000, the height of the high-tech boom, according to Thomson Financial, a research firm in New York.
The buyouts are sparking anxiety in the United States, though their impact is complex. Foreign owners typically use acquisitions as an entry into the U.S. market and thus may be more willing than American buyers to invest in their new holdings, some economists say. But the risk is that they might also be quicker to cut back or consolidate U.S. operations when times get tough.
“Quite naturally, foreign companies want to play in this market,” said Alan Tonelson, research fellow at the U.S. Business and Industry Council, a trade group for small and mid-sized manufacturers. “They want leading-edge technology, and the United States is still the technology leader. But when they buy these companies, theyre acquiring control over the most dynamic pieces of the American economy, and theyre acquiring control over Americas future.”
Overseas buyouts are just one way the dollars falling value is having an impact. The weaker dollar has also drawn European, Asian, and Canadian tourists, made it more expensive for Americans to travel abroad, and bolstered the exports of U.S. companies that sell high-tech equipment or medical gear around the world. But foreign acquisitions could become the sagging dollars most lasting legacy.
In New England, one of the regions heavily affected, 69 companies have been sold to foreign buyers in the first nine months of 2007 for a total of $30.8 billion - also a seven-year high.
Last month, Koninklijke Philips Electronics of the Netherlands snapped up Color Kinetics, a maker of lighting systems, for $714 million. Analog Devices agreed to sell a pair of cellular product lines to Taiwans MediaTek for $350 million earlier this month. Just this week, Australias United Group completed a $411 million purchase of Unicco Service, a company that provides cleaning services for office buildings.
Some see the takeovers as inevitable in a global economy where geographic borders are no match for increasingly multinational companies.
“Its part of the overall global economic climate,” said Brian Bethune, a U.S. economist for Global Insight, who said the acquisitions should be judged case by case. “Foreign companies are trying to get access to the U.S. market, and generally thats positive. European and Asian companies tend to take a longer view, and could be more patient investors than U.S. hedge funds.”
For now, many of the overseas buyers are promising to invest in their acquired properties. The new management team at Sabic Innovative Plastics, the former GE Plastics, plans to add 75 to 100 employees to its 425-person workforce.
“Were really lucky it wasnt bought by a Dow or a Dupont, because they might have moved the work from here to another one of their U.S. facilities,” said Alfred Shogry, president of the Berkshire Central Labor Council in Pittsfield, Massachusetts.
Color Kinetics, the Dutch acquisition newly renamed Phillips Solid State Lighting Solutions, is also beefing up its 160-person workforce.
“Phillips is looking at us to be their global research and development center for LED-based lighting fixtures,” said company spokeswoman Felicia Spagnoli. “Were absolutely hiring and growing right now. We have been more successful in North America than they were in LEDs, and now they want to take what we have and grow it.”
But that is not always the case with foreign takeovers. The French telecom equipment maker Alcatel, which bought its American rival, Lucent Technologies, last year, said this month it would cut thousands of jobs. And the outsourcing provider Caritor, which has corporate offices in California but almost all its employees and operations in India, recently said it planned to eliminate more than a quarter of the 350 jobs at the Charlestown headquarters of technology services firm Keane, which it purchased in June.
While overseas companies have been buying U.S. businesses for years, a new element in the current acquisition wave is foreign governments, like China, Dubai, and the United Arab Emirates, investing directly in U.S. assets.
