Wolseley, a large U.K.-based industrial distributor that competes with The Home Depot, wanted more U.S. distribution for its products. Rather than expand its own network, in 2006 the company bought a firm that already had the distribution it wanted: Northern Water Works Supply, a Fargo, North Dakota, business that distributes products for water, sewer, and irrigation systems. “Our client had distribution channels they wanted,” says Mike Groppetti, a partner at Minneapolis-based Prestwick Partners, a boutique investment bank and mergers and acquisitions service provider that helped broker the deal.
Wolseley is hardly alone. In 2003, foreign buyers acquired 1,033 U.S. companies. In 2007, it was increased to 1,698, according to FactSet Mergerstat, a California research firm that tracks mergers and acquisitions.
Minnesota is seeing this trend, too. In 2003, foreign buyers purchased eight Minnesota companies. By 2007, that number had increased to 23—a minority of the national deals, but still a growing trend.
Who’s Buying?
The trend toward foreign purchasers is part of an overall growth in global business perspective, notes Ivar Sorensen, managing partner at Minneapolis-based The M&A Group, a consulting firm that helps buy and sell companies. “For the last seven to nine years, we’ve seen a continuum of increasing interaction in everyday business and joint ventures, partnerships, and intellectual property development agreements,” he says. It’s not just foreign companies buying American businesses—it’s businesses buying other firms that fit their needs, regardless of international boundaries.
| Acquired from Abroad See a list of Minnesota companies that we acquired by foreign firms from 2005 through 2007. Get the details on which companies have been sold to foreign firms, and countries that have a growing presence in Minnesota. |
Foreign private equity firms were likely buyers for Minnesota companies in 2007, helped along in part by sovereign wealth funds, through which governments invest public money in private equity or hedge funds. Strategic purchasers form the current majority of foreign buyers. They cross borders to get better manufacturing deals, acquire new distribution channels, find specialty manufacturers, take advantage of U.S. strength in such industries as finance and business services, and gain access to new markets.
In doing so, they get a boost from the low value of the dollar against other major currencies. “It’s as if U.S. companies are on sale,” says Mike Stanchfield, a partner in the M&A group at Minneapolis-based law firm Faegre & Benson.
