FOR WIRE TRANSMISSION: 10:00 A.M. EDT, WEDNESDAY, JUNE 10, 1998 Mahnaz Fahim-Nader: (202) 606-9828 BEA 98-17 William Zeile: (202) 606-9893 Foreign Investors' Spending to Acquire or Establish U.S. Businesses Continued at High Level in 1997 Foreign investors' spending to acquire or establish U.S. businesses declined in 1997 but remained strong, according to preliminary estimates by the Commerce Department's Bureau of Economic Analysis. This spending, which includes both outlays made directly by foreign investors and outlays made through their existing U.S. affiliates, was $70.8 billion in 1997, down from a record of $79.9 billion in 1996 but well above outlays in most earlier years. The decrease in outlays in 1997 was 11 percent, the first decline since 1992. Outlays had increased at an average annual rate of 45 percent from 1993 to 1996. The decline in outlays from the 1996 peak reflected a reduction in the number of very large investments and a sharp decline in new investments from Japan, where economic conditions were less favorable. In addition, the appreciation of the U.S. dollar in 1997 may have dampened new investment. Although down somewhat from 1996, the level of outlays in 1997 was still relatively high, reflecting the continuing importance of many of the factors that helped to generate the resurgence in new foreign direct investment that began in 1993. The U.S. economy continued to expand strongly for the sixth consecutive year, and overall merger and acquisition activity in the United States was at record levels. The continued economic expansion in the United States and favorable business conditions in several major investor countries generated profits that could be used for investments by both existing U.S. affiliates of foreign companies and foreigners investing from abroad. In addition, long-term interest rates in the United States remained low. Source of funding The portion of outlays financed with funds supplied by foreign parents dropped sharply -- from an unusually high 68 percent in 1996 to 55 percent in 1997, a share more in line with historical experience. In dollar terms, outlays financed with funds supplied by foreign parents dropped $15.6 billion, to $39.1 billion. The decline was in contrast to the increase in net capital inflows for foreign direct investment in the United States (FDIUS) recorded in the U.S. balance of payments accounts for 1997, as increases in inflows for the purpose of financing their exiting affiliates more than offset the decline related to funding for new investments. Net capital inflows for FDIUS increased $30.9 billion, to $107.9 billion, in 1997. Of the components of capital inflows -- equity capital, reinvested earnings, and intercompany debt -- changes in equity capital tend to reflect most closely changes in new foreign investment and, in 1997, these inflows declined $5.2 billion, to $47.8 billion. (These estimates of capital inflows are preliminary; revised estimates will be released on June 18.) Investment outlays by industry and by country By industry of the U.S. businesses acquired or established, outlays were mainly in manufacturing ($20.0 billion, or 28 percent of total outlays), services ($12.4 billion or 18 percent), and insurance ($8.6 billion or 12 percent). By country of ultimate beneficial owner, the largest investor countries were the United Kingdom ($13.4 billion), the Netherlands ($11.3 billion), and Canada ($10.8 billion). Outlays by Japanese investors, at $1.8 billion, were only about one-tenth of their 1990 peak of $19.9 billion. Selected operating data The total assets of U.S. businesses newly acquired or established were $179.5 billion in 1997, down from $241.0 billion in 1996. U.S. businesses that were newly acquired in 1997 had assets of $165.0 billion, employed 278,000 workers, and owned 203,500 hectares (502,792 acres) of U.S. land. U.S. businesses that were newly established in 1997 had assets of $14.4 billion, employed 20,000 workers, and owned 23,000 hectares (56,149 acres) of land. * * * Estimates for 1997 are preliminary. Revised estimates for 1997 and preliminary estimates for 1998 will be released in the spring of next year. * * * Data in this report are from 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. The data are limited to newly acquired or established U.S. business enterprises with total assets of over $1 million or ownership of at least 81 hectares (200 acres) of U.S. land. * * * Additional details on the new investment by foreign direct investors in 1997, together with an analysis of the overall operations of U.S. affiliates of foreign companies in 1996, will appear in the June issue of the Survey of Current Business, the monthly journal of the Bureau of Economic Analysis. * * * BEA's major national, international, regional, and industry estimates; selected articles from the Survey of Current Business; and BEA news releases are available on BEA's Web site: http://www.bea.gov STAT-USA maintains an electronic bulletin board (EBB) and an Internet site, which contains BEA estimates, BEA news releases, and the Survey of Current Business. The information available through STAT-USA is often more detailed and more timely than that available from other sources. 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Table 1.--Investment Outlays, Investments, and Investors, 1990-97 _________________________________________________________________________________________________________ | | Outlays (millions of dollars) |________________________________________________________________________ | | | | | | | | | 1990 | 1991 | 1992 | 1993 | 1994 | 1995 | 1996/r/| 1997/p/ ________________________________|________|________|________|________|________|________|________|_________ | Investments, total .............| 65,932 25,538 15,333 26,229 45,626 57,195 79,929 70,819 U.S. businesses acquired .....| 55,315 17,806 10,616 21,761 38,753 47,179 68,733 64,272 U.S. businesses established ..| 10,617 7,732 4,718 4,468 6,873 10,016 11,196 6,547 | Investors, total................| 65,932 25,538 15,333 26,229 45,626 57,195 79,929 70,819 Foreign direct investors .....| 14,026 8,885 4,058 6,720 13,628 11,927 32,230 15,496 U.S. affiliates ..............| 51,906 16,653 11,275 19,509 31,999 45,268 47,699 55,323 | |________________________________________________________________________ | | Number |________________________________________________________________________ | Investments, total....... | 1,617 1,091 941 980 1,036 1,124 1,155 1,050 U.S. businesses acquired .....| 839 561 463 554 605 644 686 613 U.S. businesses established ..| 778 530 478 426 431 480 469 437 | Investors, total ...............| 1,768 1,220 1,019 1,094 1,144 1,213 1,302 1,191 Foreign direct investors .....| 670 438 350 368 345 345 374 299 U.S. affiliates ..............| 1,098 782 669 726 799 868 928 892 _________________________________________________________________________________________________________ p Preliminary. r Revised. Source: U.S. Department of Commerce, Bureau of Economic Analysis Table 2--Number of Investments by Size of Outlays, 1990-97 ______________________________________________________________________________________________________________ | | | | | | | | | 1990 | 1991 | 1992 | 1993 | 1994 | 1995 | 1996/r/ | 1997/p/ _____________________________________|________|________|________|________|_______|________|_________|_________ Total.......................... 1,617 1,091 941 980 1,036 1,124 1,155 1,050 $2 billion or more................... 5 1 0 1 4 5 8 3 $1 billion - $1.9 billion............ 6 1 0 1 4 4 10 12 $100 million - $999 million.......... 74 45 28 47 71 79 103 107 $10 million - $99 million............ 499 273 252 252 273 329 366 339 Less than $10 million................ 1,033 771 661 679 684 707 668 589 Addenda: Percent of total outlays: Investments of $1 billion or more.................. 40 12 0 19 39 41 48 36 Investments of $100 million or more.................. 73 59 42 64 78 78 83 81 ______________________________________________________________________________________________________________ p Preliminary. r Revised. Source: U.S. Department of Commerce, Bureau of Economic Analysis Table 3--Source of Funding of Investment Outlays, 1990-97 ___________________________________________________________________________________________________________________________ | | | | | | | | | 1990 | 1991 | 1992 | 1993 | 1994 | 1995 | 1996/r/ | 1997/p/ ___________________________________________________|________|________|________|________|_______|________|_________|________ Total outlays............................... 65,932 25,538 15,333 26,229 45,626 57,195 79,929 70,819 Funds from foreign parent groups .................. 32,495 14,114 7,808 11,921 27,014 30,847 54,737 39,123 Funds from other foreign sources or U.S. sources... 33,437 11,424 7,525 14,308 18,612 26,348 25,192 31,696 Addendum--Funds from foreign parent groups as a percent of total .................... 49 55 51 45 59 54 68 55 ___________________________________________________________________________________________________________________________ p Preliminary. r Revised. Source: U.S. Department of Commerce, Bureau of Economic Analysis Table 4.--Investment Outlays by Industry of U.S. Business Enterprise and by Country of Ultimate Beneficial Owner, 1990-97 [Millions of dollars] ______________________________________________________________________________________________________________________ | | | | | | | | | 1990 | 1991 | 1992 | 1993 | 1994 | 1995 | 1996/r/| 1997/p/ ______________________________________________|________|________|________|________|________|________|________|________ Total................................... 65,932 25,538 15,333 26,229 45,626 57,195 79,929 70,819 By industry: Petroleum................................... 1,141 702 463 882 469 1,520 1,059 688 Manufacturing............................... 23,898 11,461 6,014 11,090 21,218 26,643 27,835 19,963 Food and kindred products................. 997 1,247 404 1,294 4,567 3,802 1,145 2,119 Chemicals and allied products............. 7,518 2,897 1,644 5,035 6,905 12,511 3,961 4,034 Primary and fabricated metals............. 2,447 797 1,187 1,297 1,485 547 3,222 1,196 Machinery................................. 3,795 4,929 1,002 1,778 1,867 4,489 4,355 5,178 Other manufacturing....................... 9,141 1,591 1,778 1,686 6,393 5,293 15,151 7,436 Wholesale trade............................. 1,676 623 698 837 2,156 1,168 4,746 2,578 Retail trade................................ 1,250 1,605 256 1,495 1,542 2,838 2,988 438 Depository institutions/1/.................. 987 482 529 958 2,026 2,301 1,944 3,935 Finance, except depository institutions/1/.. 2,121 2,199 797 1,599 2,195 7,837 8,676 6,536 Insurance................................... 2,093 2,102 291 1,105 450 654 4,688 8,639 Real estate................................. 7,771 3,823 2,161 1,883 2,647 2,996 4,175 3,831 Services.................................... 19,369 2,256 2,023 4,162 7,163 5,881 15,292 12,407 Other industries............................ 5,716 284 2,101 2,218 5,760 5,359 8,528 11,802 By country/2/: Canada...................................... 3,340 3,454 1,351 3,797 4,128 8,029 9,700 10,764 Europe...................................... 36,011 13,994 8,344 16,845 31,920 38,195 49,427 46,190 France.................................... 10,217 4,976 406 1,249 1,404 1,129 6,021 2,772 Germany .................................. 2,363 1,922 1,964 2,841 3,328 13,117 12,858 6,412 Netherlands............................... 2,247 1,661 1,331 2,074 1,537 1,061 6,476 11,255 Switzerland............................... 3,905 1,327 1,259 804 5,044 7,533 4,910 6,351 United Kingdom............................ 13,096 2,169 2,255 8,238 17,261 9,094 14,757 13,355 Other Europe.............................. 4,183 1,939 1,129 1,639 3,346 6,261 4,405 6,045 Latin America and Other Western Hemisphere.. 796 375 1,438 874 1,352 1,550 1,790 923 South and Central America................. 399 108 1,152 527 (D) 1,283 (D) (D) Other Western Hemisphere.................. 397 267 286 347 (D) 267 (D) (D) Africa...................................... (D) (D) (D) (D) (D) (D) (D) (D) Middle East................................. 472 1,006 238 1,308 (D) 447 (D) 918 Asia and Pacific............................ 23,170 6,560 3,716 3,004 5,263 8,688 12,751 11,993 Australia................................. 1,412 251 164 129 1,522 2,270 2,222 8,421 Japan..................................... 19,933 5,357 2,921 2,065 2,715 3,602 8,813 1,845 Other Asia and Pacific.................... 1,825 952 631 810 1,026 2,816 1,716 1,727 United States/3/............................ (D) (D) (D) (D) 201 (D) (D) (D) _______________________________________________________________________________________________________________________ D Suppressed to avoid disclosure of data of individual companies. p Preliminary. r Revised. 1. Prior to 1992, "depository institutions" excludes, and "finance, except depository institutions" includes, savings institutions and credit unions. Beginning with 1992, savings institutions and credit unions have been reclassified from "finance, except depository institutions" to "depository institutions." 2. 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 (UBO). 3. The 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.--Total Assets, Sales, Net Income, Employment, and Hectares of Land Owned by U.S. Business Enterprises Acquired or Established, by Industry of U.S. Business Enterprise, 1997 (Millions of dollars unless otherwise indicated) ___________________________________________________________________________________________________________________________________________________ |Total as-| U.S. business enterprises acquired | U.S. business enterprises established |sets of | | |_____________________________________________|______________________________________________ |all U.S. | | | | | | | | | | |business | Total |Sales/1/| Net | Number | Number | Total |Sales/1/| Net | Number | Number |enter- | assets| | income | of | of | assets| | income | of | of |prises | | | | employ-| hectares| | | | employ-|hectares |acquired | | | | ees | of land | | | | ees | of land |or estab-| | | | | owned/2/| | | | |owned/2/ |lished | | | | | | | | | | _____________________________________________|_________|_______|________|_________|________|_________|_______|________|_________|________|_________ All industries ........................ 179,476 165,033 52,404 1,585 277,561 203,477 14,443 11,175 790 20,084 22,723 Petroleum ................................... 3,989 (D) (D) -2 G (D) (D) (D) (D) F (D) Manufacturing ............................... 21,144 18,781 17,924 477 85,287 (D) 2,363 3,373 219 10,224 2,101 Food and kindred products ................. 2,227 1,968 1,468 55 4,692 347 258 (D) (*) A (D) Chemicals and allied products ............. 4,759 4,254 2,672 207 7,341 (D) 505 (D) (D) G (D) Primary and fabricated metals ............. 1,132 930 967 -10 6,253 108 202 120 11 790 280 Machinery ................................. 4,526 3,636 5,094 44 26,265 1,052 891 (D) 42 4,791 41 Other manufacturing ....................... 8,499 7,992 7,722 182 40,736 (D) 507 655 (D) 1,909 534 Wholesale trade ............................. 3,907 2,173 5,207 41 8,715 (D) 1,733 1,628 (D) I 0 Retail trade ................................ 521 (D) 1,372 5 10,216 2 (D) (D) -6 A 0 Depository institutions/3/................ 29,288 (D) (D) 146 8,233 220 (D) (D) 1 A 0 Finance, except depository institutions/3/... 15,051 13,089 2,465 297 11,537 (D) 1,962 126 -4 A 2 Insurance ................................... 72,704 (D) 8,407 361 12,547 290 (D) 4 -1 A 0 Real estate ................................. 4,196 560 49 14 A (D) 3,636 459 80 477 13,815 Services .................................... 12,873 12,730 6,126 168 99,929 1,962 144 170 2 507 (D) Other industries ............................ 15,802 15,635 8,548 79 39,507 (D) 167 476 -9 581 1,511 ____________________________________________________________________________________________________________________________________________________ * Less than $500,000 (+/-). D Suppressed to avoid disclosure of data of individual companies. 1. Sales, or gross operating revenue, excluding sales taxes. 2. One hectare equals 2.471 acres. Thus, in terms of acres, the businesses that were acquired owned 502,792 acres of land, and those that were established owned 56,149 acres. 3. See footnote 1, table 4. NOTES.--Data for 1997 are preliminary. For acquired businesses, data are for, or as of the end of, the fiscal year preceding the year of acquisition; for newly established businesses, data are projections for, or as of the end of, the first full year of operation. 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. Source: U.S. Department of Commerce, Bureau of Economic Analysis