Thursday, November 16, 2006
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Why do foreigners overpay for US brands?
Daniel Gross asks this question in Slate with regard to foreign purchases of American conumer companies in the U.S. His answer:
It's not that dim foreign owners are screwing up the healthy American brands they acquire. Rather, they are buying brands that are already on a downward trajectory. To foreigners, these companies may seem like iconic, big brands. IBM did invent the PC. Reebok is a pioneer in fitness. And Pier 1 is the biggest independent home furnishings chain—as of February 2006, it had more than 1,100 stores in the United States (plus 43 Pier 1 Kids stores) and $1.78 billion in annual sales. Foreign companies like these brands not because they're global icons, although Reebok and IBM have international presences, but because of their domestic cachet. It would take immense sums of money to build such brands in the United States from scratch....Of course, sometimes American companies overpay for foreign assets too. posted by Dan on 11.16.06 at 01:08 PM
Maybe they are just value shoppers interested in the long term and too smart to pay for those already peaking.posted by: Lord on 11.16.06 at 01:08 PM [permalink]
Do foreign acquirers overpay by more than domestic acquirers?
The history of companies buying other companies isn't exactly a record of brilliancy. In fact, acquisitions are, on the whole, losing propositions for the acquirer. Just look at the stock market reaction to an announcement.
posted by: Bernard Yomtov on 11.16.06 at 01:08 PM [permalink]
Oh yeah, wow. GE Finance buying Marubeni at 80 yen to the dollar....posted by: grumpy realist on 11.16.06 at 01:08 PM [permalink]
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