Tuesday, June 30, 2009

Increasing Numbers of Foreign Buyers are Looking for US Acquisitions

We sold a small screen printing business earlier this year to an individual buyer from Mexico. That buyer inquired about the business and consummated the transaction within 5 months. This is an incredibly fast transaction considering the visa approvals necessary to transfer a business to a foreign based buyer.

I was surprised by the recent buyer inquiries we have received in our offices. From the period of May 24, 2009 to June 23, 2009, seven percent of our activity was from a foreign location. You might think that the majority were from our neighbors to the north and south – that was not the case. A small percentage of this activity originated in Canada and Mexico. The majority of the buyer interest came from Europe and the Middle East.

Most surprising is how this has changed over the last 3 years. We were accustomed to receiving a handful of inquiries from distant locations but they were inconsequential. This is no longer the case. For several reasons I believe this is good news for sellers. Buying a business has become one of the more effective methods of immigrating into the United States. In fact, there are a healthy number of attorney’s who specialize in helping people immigrate with this type of transaction. There are different types of visas and we strongly recommend hiring experienced advisors. The higher impact for sellers is the opportunity to receive a higher value for the business. Typically buyers need a seller to ensure an orderly transition. In the case of a foreign buyer, this portion of the transaction because critical and thus should yield the seller additional value in the form of a higher multiple, employment contract and/or incentives tied to the future performance of the business.

Lastly, most of the visas associated with this type of transaction require that the buyer invest in the business and potentially add a minimum number of jobs over a defined period of time. This bodes well for the existing employees of the business and the community at large. Sellers should treat foreign buyer inquiries with equal amounts of interest and caution, while making certain that your business intermediary understands the nuisances of these types of transactions.

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