America On Sale: A Response to Readers

Last week I wrote a story,

Last week I wrote a story, “America on Sale,” on the sale of U.S. firms to overseas companies — a trend exemplified by INBVF acquisition of Anheuser Busch (BUD).

The story sparked a lot of reader feedback, with many commenters disturbed by the prospect that U.S. firms were being sold away to foreigners.

Here’s my response: If you’re concerned by the prospect of U.S. companies being sold off to foreign buyers, here’s my question to you: Do you see these foreign buyouts as just the symptoms of a problem or the problem by themselves?

A rash of foreign buyouts can be seen as simply the result of economic weakness: U.S. stocks are in bear market territory and the U.S. dollar is at record lows against the euro. Both make U.S. firms more affordable to foreign buyers.

But surely there are at least some benefits to foreign acquisitions? American shareholders get a payoff, and can then invest their windfalls elsewhere. In some cases, overseas investors are pumping money into U.S. companies. With long-term investment time frames, these buyers might have the patience to actually expand and improve businesses here. While ownership and sometimes headquarters shift overseas, foreign buyers typically try hard to retain American employees and operations.

Still, some readers clearly would prefer U.S. companies to be owned and run by Americans. Crenee wrote: “Wow. Wake up! Foreigners are taking over our country right up under our noses!”

Many readers trained their fire on lawmakers in Washington, blaming them for both the country’s apparent economic weakness and foreign buyouts in general. I’m wondering what you would have lawmakers do. Do you think foreign buyouts should be blocked? Or would you prefer policymakers deal with the economic weakness itself? The first option is easy — if radical — but the second option could take years to accomplish. There’s no easy solution for restoring the American economy to full health: For example, a much stronger dollar (which some commenters were pushing) would hurt U.S. exporters.

In a global economy, it gets complicated when one talks about nationality. Toyota is headquartered and listed in Japan, but it manufactures many of its cars in the U.S. Meanwhile, many American furniture companies have outsourced nearly all their production work to foreign countries. Which makes a company “American”? The location of its headquarters, its employees, its capital investments, its customers or its investors?

These comments were mostly quite pessimistic, so let me counter that gloom with one optimistic observation: For the most part, foreign buyers are coming to the U.S. because they recognize long-term potential here. They’re trying to get access to the world’s largest and wealthiest consumer market. They’re betting our problems — whether the housing slowdown, the credit crisis, dependence on expensive foreign oil, fiscal shortfalls, foreign entanglements, etc. — will blow over. In one sense, then, foreign buyouts are a vote of confidence in the American economy.

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