Measuring Foreign M&A and Other Direct Investment into the United States
How much merger and acquisition and other investment activity is directed into the United States? Is the level of foreign direct investment into U.S. businesses increasing or decreasing?
The Commerce Department’s Bureau of Economic Analysis has released three reports that provide measurements. The first, by Thomas Anderson, addresses new investments made to acquire or establish U.S. business in 2008. The chart included in this post shows annual outlays measured by this report.
Significant findings contained in the report include:
- Foreign direct investors made outlays of $260.4 billion of outlays in 2008 to acquire or establish U.S. businesses. This level is the third highest on record.
- 46% of these outlays were for large-sized transactions ($5 billion or more), double the percentage of large-sized transactions for 2007.
- 2008’s level of these outlays was a 3% increase over 2007’s level of $252 billion. The rate of increase for 2007 over 2006 was 52%.
- Outlays for manufacturing businesses accounted for the majority of spending in 2008, with outlays for financial services businesses a distant second.
- European investors made 61% of the outlays; Asia and Pacific made 17%. Outlays from Canada and the Middle East fell to 10% and 5% of the total.
- Of the $260.4 billion total, 93% of the outlays were made to acquire existing businesses, with the balance to start up new businesses.
In April, the BEA had released its report on U.S. international transactions for 2008. Net financial inflows for foreign direct investment into the U.S. were $325.3 billion, an increase of 37% over 2007’s level. These inflows included financing of both existing and new U.S. affiliates and also reflected sell-offs and other subtractions and additions. They also excluded domestic-sourced funds that are used to make new investments.
Earlier this month, BEA revised the $325.3 billion number for 2008 FDI downward by $5.5 billion to $319.7 billion. Because of a substantial upward revision to FDI reported for 2007, the new 2008 level represented a 16% year-over-year increase.
BEA has discontinued its survey that measures new foreign direct investment. Therefore, there will be no future reports on new FDI comparable to the first report referred to above in this post. Future surveys will collect related information on greenfield investments by foreign direct investors and their U.S. affiliates. BEA will also collect extensive data on FDI in the U.S. through its quarterly and annual surveys.
