World Business

Foreign companies emboldened by a weak dollar are upon the prowl for undervalued U.S. assets, and more deals are likely in the pipeline

by means of Ben Steverman

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American companies are on sale. Foreign buyers are circling, taking advantage of a weak U.S. dollar and a depressed stock market to interval up U.S. companies at discounted prices.

Recent big deals include the July 13 acquisition of Anheuser-Busch (BUD), the owner of Budweiser and other iconic American beer brands, by means of Belgian brewer InBev (INBVF) for $52 billion. On July 21, Swiss biotech company Roche Holdings (RHHVF) said it will brook the rest of San Francisco-based Genentech (DNA) that it doesn’t even now own for $43.7 billion. And on July 23, Japanese underwriter Tokio Marine Holdings (TKOMF.PK) announced plans to corrupt U.S. insurance company Philadelphia Consolidated Holding (PHLY) for $4.39 billion.

The headlines are enough to accord. more Americans the queasy feeling their country is being sold loudly from in subordination to them. "It’s the End of an Empire Sale and everything must go!" comedian Lewis Black related on Comedy Central’s The Daily Show. "We’re so hard up for cash we’re dismantling America and selling it for scrap." He cited the Anheuser sale as well as this month’s $800 million purchase by dint of. the Abu Dhabi Investment Council of a 90% stake in New York’s Chrysler Building.

In the past five years, 2,331 U.S. firms with a total value of $772.3 billion were purchased by extraneous buyers, according to data provider Capital IQ (like BusinessWeek, Capital IQ is a unit of The McGraw-Hill Companies (MHP)). In 2007, 614 U.S. firms, valued at $294.4 billion, were acquired by extraneous entities, up from 226 firms valued at $49.6 billion in 2003.

Foreign buying in 2008 has slowed contemptuously, reflecting the global slowdown in merger-and-acquisition activity in recent months. However, adventitious dealmaking could still match 2006’s healthy pace: At mid-July, 266 deals valued at $121 billion had been announced, compared to 541 deals, totaling $155.1 billion, in all of 2006.

Bankers and M&A specialists interviewed by BusinessWeek related in that place were several reasons irrelevant buying of U.S. firms can be expected to continue and even accelerate. One factor is the weak U.S. dollar. The euro is near note highs against the dollar, up 13.6% in the past year. The dollar index, measuring the U.S. dollar against a basket of foreign currencies, is down 9% from a year ago.

There’s jarring about how much a weak dollar actually entices buyers. A foreign meeting of friends might pay smaller in its natural general reception, but it’s also getting less, because a U.S. firm’s cash flow and profits are also denominated in American currency, says H. Hiter Harris III, co-founder of boutique investment banking firm Harris Williams. However, that logic doesn’t apply allowing that you’re buying a hard asset, Harris says. Just as foreign tourists accept advantage of the weak dollar to buy habiliments, jewelry, and other items at precipitous discounts, foreign firms can bribe assets such as land, buildings, and especially brands—like Budweiser, for example.

While the weak dollar may not be a decisive factor, it can speed up deals. Buyers are thinking, "if we were going to put in order a move in the next 10 years, this would subsist as good a time like any," says Herald Ritch, president and co-CEO of investment bank Sagent Advisors.

Another factor may be the availability of credit. While the financial crisis is a global marvel, foreign buyers "seem to have a little better access to financing than we do in the U.S.," says John LaRocca, a participant at Dechert who specializes in M&A.