Last week, Uber bought its Middle East rival Careem for $3.1 billion. A couple days later, McDonald’s acquired Dynamic Yield, an Israel-based big data firm. And last year, Comcast purchased British telecommunications competitor Sky for $31 billion. With this recent activity, it begs the question: are international mergers becoming more common?
Since 1985, there have been over 325 thousand mergers and acquisitions transactions, worth a combined $34.9 trillion. Recently, 2017 experienced a record number of deals with 15,100 deals; a 12.2 percent year-over-year increase.
In 1985, just 5 percent of these mergers were outbound; that is, only 5 percent of acquisitions were U.S. companies purchasing international firms. By 2016, that number jumped to 14 percent. On the opposite side, only 11 percent of acquisitions consisted of international companies buying U.S. firms; this figure rose to 17 percent by 2016.
Most importantly, the trend shows that the number of domestic acquisitions has fallen from 84 to 69 percent in just 30 years, according to the Institute for Mergers, Acquisitions & Alliances. In fact, in the past ten years, roughly 32 percent of the 50 largest acquisitions occurred across borders.
“It makes a lot of sense; years ago, it used to be that the U.S. was 50% of the world’s economy, and now it’s 15% or less,” Global Chamber CEO Doug Bruhnke explains. “It makes a lot of sense that U.S. companies are connecting to these things, and this means mergers and acquisitions and a variety of ways to accelerate the growth process.”
Bruhnke notes that the two biggest reasons for these acquisitions are market access and technology. “More and more technologies are happening somewhere else; that wasn’t the case 50 years ago, but it is the case now,” he said. “More companies are saving themselves by doing that; sometimes you have to buy technology, sometimes you have to buy someone whose developed something that’s unique and different.”
Bruhnke believes that the increasing competition across borders improves productivity and the final products that companies create. For example, the Japanese automotive and aerospace industry had very strict regulations about the quality of the materials they used for their inputs. Consequently, they are a global leader in automotive vehicles, and other countries are still catching up.
“The world is changing with or without the U.S.,” Bruhnke said. “My current concern today is that there’s lots of nonsense going on around trade. Businesses have become numb to it and realized they need to just do smart things out on the market.”