Foreign buyers were behind some of the county’s biggest buys last year, boosted by favorable currency exchange rates.
The edge has allowed them to pick up local companies on the cheap in an environment stricken with tighter lending standards and lowered economic forecasts.
“We have the top technical capability, skills and knowledge,” said Peter Dolbee, a partner with Newport Beach-based accounting firm Haskell & White LLP. “If you can get it for half off, why not?”
The dollar is trading at record lows to the euro and Taiwanese dollar, the base currencies for the county’s top two sales last year.
Foothill Ranch-based Oakley Inc. sold to Italy’s Luxottica Group SPA for a little more than $2 billion. Irvine-based Gateway Inc. went to Taiwan’s Acer Inc. for almost $710 million.
“The deals were probably won on price and in those circumstances, even a modest cost advantage that a foreign buyer might enjoy could put them in the winner’s circle,” said Murray Rudin, who heads the Irvine office for Los Angeles-based private equity firm Riordan, Lewis & Haden.
Tougher lending standards are also making it harder for investors to fund deals, according to Michael Lowell, managing director with the Newport Beach office of investment bank B. Riley & Co.
Two years ago firms were able to borrow more dollars at cheaper rates than what their investments were yielding, he said.
With lenders less willing to lend and with some companies starting to earn less, the deals aren’t as attractive.
Recent changes in exchange rates has set up foreign buyers nicely, Lowell said.
But foreign buyers have their own challenges, said Greg Presson, a senior managing director with B. Riley.
“They’ll still get taxed in their own country. It’s not simply a matter of picking up cheap deals,” Presson said.
A change in the White House also may limit the number of deals this year as investors hold off until more clarity over tax laws can be discerned. (Others say the prospect of a Democratic administration could prompt more deals to get done before the changeover. See story page 39.)
But the usual six to eight month process it takes to get deals done would stretch into the administration changeover, Presson added.
About 35% of B. Riley’s business is with foreign clients, up from 25% two years ago, according to Lowell.
B. Riley speaks with foreign executives and buyers routinely and predicts foreign acquisitions of U.S.-based companies will remain steady.
Smaller Companies’ Challenges
For smaller companies, bringing in foreign clients is a challenge.
Irvine-based accountant Haskell & White LLP does about 20% of its business with foreign companies but is looking to increase that, according to Peter Dolbee, a partner with the firm.
Dolbee’s firm pays a yearly fee to be a member of the Leading Edge Alliance, a network setup to help companies find foreign clients.
“They want to invest here,” Dolbee said. “We’re one hell of an economy as far as the world goes.”
Dolbee’s firm specializes in Securities and Exchange Commission rules, and has worked recently with companies from France, Belgium and Mexico.
Creso Capital Partners, a Newport Beach consultant for mergers and acquisitions, also is looking abroad.
“That’s where the money is,” said Thomas Papa, managing director with Creso. “They’re getting more bang for their buck when they come here.”
Papa is traveling to Dubai for the first time in hopes to stir up interest for the smaller companies he works with that are not as well known to foreign investors.
An associate of his, who he declined to name, also is looking abroad to find a buyer for a $600 million real estate portfolio.
The portfolio bundles a number of smaller properties that are off the radar of foreign investors because they’re too small. The hope is that the large price tag will attract investors, he said.
There’s been a number of notable sales by local companies to foreign buyers recently.
Allegiance Investment Management LLC in Huntington Beach was bought by Australia’s Macquarie Bank Ltd. for an undisclosed amount this month.
Quiksilver Inc. in Huntington Beach sold its Cleveland Golf Co. unit to Japan’s Sumitomo Rubber Industries Ltd. for $132 million in December.
In September, J.D. Lincoln Inc. in Costa Mesa was sold to Britain’s Umeco PLC for $75 million.
Ingram Micro Inc. in Santa Ana said last year it was selling its Ingram Micro Semiconductor Asia Pte Ltd. to Japan’s Tomen Electronics Corp. for $19 million.
