News Release
Foreign Investors' Spending to Acquire or Establish U.S. Businesses, 1999
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Ned Howenstine (202) 606-9845 BEA 00-14
Foreign Investors' Spending to Acquire or Establish U.S. Businesses
Increased Sharply to $283 Billion in 1999
Foreign investors' spending to acquire or establish U.S. businesses increased 31
percent to a record $282.9 billion in 1999 after tripling to $215.3 billion in 1998,
according to preliminary estimates by the Commerce Department's Bureau of Economic
Analysis. Prior to 1998, foreign investors' spending for new U.S. investments, which
includes both outlays made directly by foreign investors and outlays made through their
existing U.S. affiliates, never exceeded $80.0 billion.
The exceptionally high outlays in the last 2 years reflect a worldwide boom in merger
and acquisition activity, the continuing strength of the U.S. economy, and the increasing
number and size of large investments. In both years, investments involving outlays of
$2 billion or more accounted for over 65 percent of total outlays. In contrast, in the
previous 6 years, investments of this size had never accounted for more than 30
percent of total outlays.
The increases in both 1998 and 1999 partly reflected sharp increases in
investments by British investors, whose outlays in both years (as in most recent years)
were larger than those of any other country.
Some of the largest investments in 1999 were the acquisitions of companies in
communications-related industries, where deregulation and rapid technological change
have spurred growth and provided incentives for business combinations. In 1999,
foreign firms acquired several major U.S. companies that were involved in
telecommunications services, Internet-based information services, and the
manufacturing of fiber optic, Internet, and other communications equipment.
In 1999, as in 1998, several of the largest acquisitions involved exchanges of
stock. In these exchanges, the shareholders in the acquired U.S. companies received
stock in the foreign parent companies as partial or total payment for the acquisitions.
By type of investment and type of investor
Outlays to acquire existing U.S. companies, rather than to establish new U.S.
companies, accounted for $276.5 billion, or 98 percent of total outlays in 1999, well
above the 82-percent average for the preceding 5 years. Over half of the outlays were
made by existing U.S. affiliates ($154.3 billion) rather than by foreign direct investors
themselves ($128.6 billion); however some of the outlays by existing affiliates were
financed with funds provided to them by their foreign parents.
By source of funding
Outlays financed by funds supplied by new or existing foreign parents, rather
than by existing U.S. affiliates, increased to $226.9 billion in 1999 from $159.4 billion in
1998. These outlays are part of overall capital inflows for foreign direct investment in
the United States (FDIUS) as recorded in the financial account of the U.S. international
transactions accounts, and they contributed to an increase in FDIUS capital inflows to
$282.5 billion in 1999 from $193.4 billion in 1998. (In addition to outlays from foreign
parents to acquire or establish new U.S. affiliates, capital inflows for FDIUS include
foreign parents' financing of their existing U.S. affiliates. The estimates of capital
inflows for FDIUS are preliminary.)
By industry and by area and country
By industry, outlays increased sharply in information, particularly in
telecommunications, in finance (except depository institutions) and insurance, and in
depository institutions. Outlays decreased sharply in manufacturing, primarily because
total outlays for 1998 included exceptionally large investments in petroleum and coal
products manufacturing and in motor vehicle manufacturing. Within manufacturing,
outlays in 1999 were substantial in computers and electronic products, particularly in
semiconductors and other electronic components, and in communications equipment.
(See note on new industry classifications.)
By country of ultimate beneficial owner (UBO), investors in Europe -- mainly the
United Kingdom and France-- accounted for most of the increase in outlays in 1999;
European investors accounted for more than 70 percent of total outlays in both years.
Outlays by investors in "Latin America and Other Western Hemisphere" -- mainly
Bermuda -- and in "Asia and Pacific" -- mainly Japan -- also increased in 1999, but the
share of these areas in total outlays was comparatively small -- 12 percent and 4
percent, respectively.
Selected operating data
U.S. businesses that were newly acquired or established by foreign investors in
1999 had total assets of $454.4 billion, compared with $274.3 billion for those acquired
or established in 1998. They employed 648,000 people, up from 625,000.
The 1998 estimate of total outlays has been revised up 7 percent from the
preliminary estimate published last year.
* * *
Estimates in this report are based upon a Bureau of Economic Analysis survey
that covers (1) existing U.S. business enterprises in which foreign investors acquired,
either directly or through their U.S. affiliates, at least a 10-percent ownership interest
and (2) new U.S. business enterprises established by foreign investors or their U.S.
affiliates, also using the 10-percent ownership interest threshold. The 1998 and 1999
estimates cover all newly acquired or established business enterprises. Estimates for
years prior to 1998 cover newly acquired or established business enterprises with total
assets of over $1 million or ownership of at least 81 hectares (200 acres) of U.S. land.
Values for the small investments that were not covered prior to 1998 were negligible
and the estimates for 1998 and 1999 are therefore comparable with those for the earlier
years.
Additional details on the new investments by foreign investors in 1999 will
appear in the June issue of the Survey of Current Business, the monthly journal of the
Bureau of Economic Analysis. The preliminary estimates for capital inflows for foreign
direct investment in the United States were published in Christopher L. Bach, "U.S.
International Transactions:, Fourth Quarter and Year 1999," Survey 80 (April 2000):
146-192. Revised estimates will be released on June 20 and published in greater detail
in the July issue of the Survey.
* * *
Note on new industry classifications
The 1998 and 1999 estimates by industry reflect two changes in industry
classification. First, the estimates are based on classifications derived from the new
North American Industry Classification System (NAICS); the estimates for the preceding
years are based on classifications derived from the Standard Industrial Classification
(SIC) system. Second, petroleum is no longer treated as a separate major industry;
instead, the various petroleum-related activities are distributed among the major NAICS
industry groups to which they belong.
To help assess the impact of these changes, estimates for 1998 are presented
on both the new (table 3A) and the old (table 3B) bases. The share of total outlays
accounted for by manufacturing in 1998 is much larger in table 3A than in table 3B
because petroleum and coal products manufacturing is classified in manufacturing in
table 3A but in the special industry group "petroleum" in table 3B. Because investment
in petroleum and coal product manufacturing was insignificant in 1999, the change in
treatment of petroleum-related activities has virtually no effect on the total for
manufacturing for that year.
* * *
BEA's major national, international, regional, and industry estimates; the Survey
of Current Business; and BEA news releases are available without charge on BEA's
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Summary BEA estimates are available on recorded messages at the time of
public release at the following telephone numbers:
(202) 606-5306 Gross domestic product
606-5303 Personal income and outlays
606-5362 U.S. international transactions
Most of BEA's estimates and analyses appear in the Survey of Current Business,
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Superintendent of Documents, U.S. Government Printing Office, Washington, DC
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Table 1.--Investment Outlays by Type of Investment and Investor, 1992-99
[Millions of dollars]
_______________________________________________________________________________________________________________________________
| | | | | | | |
| 1992 | 1993 | 1994 | 1995 | 1996 | 1997 | 1998/r/ | 1999/p/
_______________________________________|__________|__________|__________|__________|__________|__________|__________|__________
Total outlays ......................... 15,333 26,229 45,626 57,195 79,929 69,708 215,256 282,946
By type of investment:
U.S. businesses acquired ......... 10,616 21,761 38,753 47,179 68,733 60,733 182,357 276,489
U.S. businesses established ...... 4,718 4,468 6,873 10,016 11,196 8,974 32,899 6,457
By type of investor:
Foreign direct investors ......... 4,058 6,720 13,628 11,927 32,230 13,899 120,828 128,569
U.S. affiliates .................. 11,275 19,509 31,999 45,268 47,699 55,809 94,428 154,377
_______________________________________________________________________________________________________________________________
p Preliminary.
r Revised.
Table 2.--Share of Total Outlays by Size of Investment, 1992-99
(Percent)
_______________________________________________________________________________________________________
| | | | | | |
1992 | 1993 | 1994 | 1995 | 1996 | 1997 | 1998/r/| 1999/p/
_________________________________________|_________|_______|________|_______|________|________|________
Total outlays................... 100 100 100 100 100 100 100 100
$5 billion or more ........... 0 0 0 (D) 0 0 55 53
$2 billion - $4.9 billion .... 0 (D) 27 18 29 12 11 16
$100 million - $1.9 billion .. 42 51 51 48 55 67 27 26
Less than $100 million ....... 58 (D) 22 (D) 16 21 7 5
________________________________________________________________________________________________________
D Suppressed to avoid disclosure of data of individual companies.
p Preliminary.
r Revised.
Table 3A.--Investment Outlays by NAICS-Based Industry of U.S. Business Enterprise, 1998-99
[Millions of dollars]
___________________________________________________________________________________________
| |
| 1998/r/ | 1999/p/
______________________________________________________________|________________|___________
All industries ........................................ 215,256 282,946
Manufacturing ............................................... 149,243 74,195
Food ...................................................... 1,286 869
Beverages and tobacco products............................. 442 1,501
Petroleum and coal products................................ 67,658 (D)
Chemicals ................................................ 3,627 5,425
Plastics and rubber products............................... 1,434 3,682
Nonmetallic mineral products............................... 900 2,233
Primary metals............................................. 2,454 1,751
Fabricated metal products.................................. 532 1,196
Machinery ................................................. 5,220 14,900
Computers and electronic products ......................... 17,861 32,376
Electrical equipment, appliances, and components .......... 136 4,415
Transportation equipment .................................. 37,177 (D)
Other ..................................................... 10,516 2,959
Wholesale trade ............................................. 3,321 1,030
Retail trade ................................................ 1,153 4,564
Information ................................................. 13,399 93,475
Publishing industries ..................................... 9,856 (D)
Motion pictures and sound recording industries ............ 36 3
Broadcasting and telecommunications ....................... 2,841 80,073
Information services and data processing services ......... 667 (D)
Depository institutions ..................................... 1,563 11,845
Finance (except depository institutions) and insurance ...... 21,057 47,023
Real estate and rental and leasing .......................... 6,299 5,689
Professional, scientific, and technical services ............ 4,289 11,355
Other industries ............................................ 14,932 33,771
___________________________________________________________________________________________
D Suppressed to avoid disclosure of data of individual companies.
p Preliminary.
r Revised.
NAICS North American Industry Classification System
Source: U.S. Department of Commerce, Bureau of Economic Analysis
Table 3B.--Investment Outlays by SIC-Based Industry of U.S. Business Enterprise, 1992-98
[Millions of dollars]
___________________________________________________________________________________________________________________
| | | | | | |
| 1992 | 1993 | 1994 | 1995 | 1996 | 1997 | 1998/r/
_____________________________________________|_________|_________|_________|_________|_________|_________|_________
All industries ....................... 15,333 26,229 45,626 57,195 79,929 69,708 215,256
Petroleum .................................. 463 882 469 1,520 1,059 762 (D)
Manufacturing .............................. 6,014 11,090 21,218 26,643 27,835 19,603 89,739
Food and kindred products ................ 404 1,294 4,567 3,802 1,145 1,949 1,728
Chemicals and allied products ............ 1,644 5,035 6,905 12,511 3,961 4,539 3,604
Primary and fabricated metals ............ 1,187 1,297 1,485 547 3,222 1,327 2,978
Machinery ................................ 1,002 1,778 1,867 4,489 4,355 4,788 21,495
Other manufacturing ...................... 1,778 1,686 6,393 5,293 15,151 7,000 59,934
Wholesale trade ............................ 698 837 2,156 1,168 4,746 2,612 3,266
Retail trade ............................... 256 1,495 1,542 2,838 2,988 435 1,938
Depository institutions .................... 529 958 2,026 2,301 1,944 3,547 1,563
Finance, except depository institutions .... 797 1,599 2,195 7,837 8,676 7,019 16,607
Insurance .................................. 291 1,105 450 654 4,688 8,526 4,709
Real estate ................................ 2,161 1,883 2,647 2,996 4,175 4,119 6,144
Services ................................... 2,023 4,162 7,163 5,881 15,292 12,187 10,099
Other industries ........................... 2,101 2,218 5,760 5,359 8,528 10,898 (D)
___________________________________________________________________________________________________________________
D Suppressed to avoid disclosure of data of individual companies.
r Revised.
SIC Standard Industrial Classification
Source: U.S. Department of Commerce, Bureau of Economic Analysis
Table 4.--Investment Outlays by Country of Ultimate Beneficial Owner, 1992-99 /1/
[Millions of dollars]
______________________________________________________________________________________________________________________________________
| | | | | | | |
| 1992 | 1993 | 1994 | 1995 | 1996 | 1997 | 1998 /r/ | 1999 /p/
______________________________________________|__________|__________|__________|__________|__________|__________|__________|__________
All countries ........................... 15,333 26,229 45,626 57,195 79,929 69,708 215,256 282,946
Canada ....................................... 1,351 3,797 4,128 8,029 9,700 11,755 22,635 11,388
Europe ....................................... 8,344 16,845 31,920 38,195 49,427 44,014 170,173 205,150
France ..................................... 406 1,249 1,404 1,129 6,021 2,578 14,493 24,579
Germany .................................... 1,964 2,841 3,328 13,117 12,858 6,464 39,873 24,393
Netherlands ................................ 1,331 2,074 1,537 1,061 6,476 10,244 19,009 26,896
Switzerland ................................ 1,259 804 5,044 7,533 4,910 6,745 4,525 7,119
United Kingdom ............................. 2,255 8,238 17,261 9,094 14,757 11,834 84,995 110,115
Other Europe ............................... 1,129 1,639 3,346 6,261 4,405 6,149 7,278 12,048
Latin America and Other Western Hemisphere ... 1,438 874 1,352 1,550 1,790 924 11,354 34,013
South and Central America .................. 1,152 527 (D) 1,283 (D) 166 920 1,377
Other Western Hemisphere ................... 286 347 (D) 267 (D) 758 10,433 32,636
Africa ....................................... (D) (D) (D) (D) (D) (D) 212 (D)
Middle East .................................. 238 1,308 (D) 447 (D) 847 2,810 546
Asia and Pacific ............................. 3,716 3,004 5,263 8,688 12,751 11,786 7,329 11,502
Australia .................................. 164 129 1,522 2,270 2,222 7,600 (D) (D)
Japan ...................................... 2,921 2,065 2,715 3,602 8,813 2,326 4,862 8,048
Other Asia and Pacific ..................... 631 810 1,026 2,816 1,716 1,860 (D) (D)
United States /2/ ............................ (D) (D) 201 (D) (D) (D) 743 (D)
______________________________________________________________________________________________________________________________________
D Suppressed to avoid disclosure of data of individual companies.
p Preliminary.
r Revised.
1. For investments in which more than one investor participated, each investor and each investor's outlays are classified by
country of each ultimate beneficial owner.
2. The ultimate beneficial owner (UBO) is the first person in the ownership chain of the acquired or established U.S. business,
beginning with the foreign parent, that is not owned more than 50 percent by another person. The foreign parent is the first
foreign person in the ownership chain. The country of UBO is often the same as that of the foreign parent, but it may be a
different foreign country or the United States.
Source: U.S. Department of Commerce, Bureau of Economic Analysis
Table 5.--Selected Operating Data of U.S. Business Enterprises Acquired or Established,
by NAICS-Based Industry of U.S. Business Enterprise, 1998-99
___________________________________________________________________________________________________________________________________________________________________________________________
| 1998/r/ | 1999/p/
|_______________________________________________________________|________________________________________________________________
| Millions of dollars | | | Millions of dollars | |
|_____________________________________| | |______________________________________| |
| Total | Sales | Net | Thousands | Number of | Total | Sales | Net | Thousands | Number of
| assets | | Income | of | hectares | assets | | Income | of | hectares
| | | | employees | of land | | | | employees | of land
| | | | | owned /1/ | | | | | owned /1/
__________________________________________________________|___________|____________|____________|____________|____________|____________|____________|____________|____________|____________
All industries .................................... 274,349 164,904 4,623 624.6 134,953 454,394 130,610 2,573 647.8 249,567
Manufacturing ........................................... 133,693 120,184 3,605 288.0 78,013 70,342 41,718 299 211.1 84,889
Wholesale trade ......................................... 4,445 7,731 180 12.2 172 1,660 4,039 -23 11.6 (D)
Retail trade ............................................ 1,355 2,443 66 14.4 64 5,317 14,150 20 91.5 (D)
Information ............................................. 15,599 6,398 -473 30.7 122 39,674 11,857 89 49.1 47
Depository institutions ................................. 11,382 1,035 69 H 43 119,832 10,877 20 12.6 (D)
Finance (except depository institutions) and insurance .. 72,579 8,005 971 14.1 263 166,239 15,480 1,975 30.2 1,044
Real estate and rental and leasing ...................... 14,289 1,596 375 H 7,789 7,056 1,411 124 6.0 3,456
Professional, scientific, and technical services ........ 6,389 3,467 -385 31.3 317 5,360 5,078 -313 35.8 (D)
Other industries ........................................ 14,618 14,044 215 225.7 48,166 38,915 26,000 381 199.9 158,030
___________________________________________________________________________________________________________________________________________________________________________________________
D Suppressed to avoid disclosure of data of individual companies.
p Preliminary.
r Revised.
1. One hectare equals 2.471 acres. Thus, for all industries, the number of acres of land owned in 1998 and 1999 were 333,469 and 616,680, respectively.
NOTES.--For newly acquired businesses, data cover the most recently completed financial reporting year. For newly established businesses, data are projections for the first full
year of operations.
Size ranges are given in employment cells that are suppressed. The size ranges are: A--1 to 499; F--500 to 999; G--1,000 to 2,499; H--2,500 to 4,999; I--5,000 to 9,999; J--10,000 to
24,999; K--25,000 to 49,999; L--50,000 to 99,999; M--100,000 or more.
NAICS North American Industry Classification System
Source: U.S. Department of Commerce, Bureau of Economic Analysis