So, You Want To Buy a Strategic American Company …
Advice for foreign CEOs shopping for ports, oil companies, etc.
In the last month, politicians across the globe have found a convenient new villain: the foreign multinational corporation. In the United States, the furor rages over Dubai Ports World, a government-owned firm from the United Arab Emirates that has received provisional approval to operate ports in six U.S. cities.
This hysteria is not limited to the United States. In Europe, there has been a rash of nationalist responses to foreign takeovers. In January, Indian steel magnate Lakshmi Mittal announced a hostile takeover bid for the European conglomerate Arcelor, successfully managing to annoy four European governments at once. When European countries aren't scared of Indian predators, they are busy trying to prevent hostile takeovers from one another. In the last 10 days alone, the Spanish government has threatened to block a German takeover of the power-and-gas utility Endesa SA, and France brokered a merger between its two largest energy utilities to keep Italy's Enel from taking over one of those firms. Socialist leader Evo Morales surged to victory in Bolivia's January presidential election after promising to renationalize that country's foreign-owned oil and gas concerns. Last year, China's National Offshore Oil Corporation had to withdraw its bid for Unocal in the face of congressional opposition.
Of course business xenophobia isn't new. In the '80s, Americans fretted about Japanese takeovers of America's prestige brands; in the '70s, Europeans worried about American conglomerates. And the less said about the Dutch or British East India Trading Companies, the better.
Political resistance to foreign takeovers is not all that shocking, even in the supposedly laissez-faire United States. Foreign corporations are the perfect political bogeyman. By definition, they are un-American. Critics are usually correct when they claim that these firms are only concerned with making money (our multinationals would never act like that!!), and if they are state-owned, well, then their purposes must be even more nefarious. The targets of many of these takeovers—infrastructure, utilities, steel—are perceived to have some strategic value, which makes ordinary citizens even more sensitive.
This problem won't be going away anytime soon. The whopping U.S. trade deficit has to be financed by foreign capital, and one form those capital inflows will take is the acquisition of U.S. firms. If anything, the problem will worsen as more foreign multinationals emerge from the developing world.
So, what's a foreign CEO to do? How do you take over a national treasure in such a hostile political environment? Here are a few lessons that can be learned from recent experience:
1) Read a friggin' newspaper. Every one of these takeovers has the inevitable "Officials at Foreign Conglomerate Ltd. were taken by surprise at the public hostility to what they viewed as a routine business transaction." Dubai Ports World was no exception.
This surprise is very surprising. Any decent management consultant, public-relations representative, or even a novice blogger could have pointed out why the purchase of American port operations by an Arab firm might have raised a few political hackles. Always assume that a foreign merger will be framed in the worst possible way.
2) You don't run a global company, because there's no such thing as a global company. People who believe in globalization tend to assume that multinational corporations don't really have a home country anymore. Indeed, when European resistance to Mittal Steel was evident, Indian Trade Minister Kamal Nath told reporters, "This is an era of globalization, cross-border investment and liberalization, not one in which investors are judged by the color of their skin." There are Americans shot through the management structure of DPW, even though the company controlled no U.S. ports prior to its takeover of British firm P & O.
The problem is: This is not how voters think. Voters believe that firms are the extension of governments and thus ascribe to the companies all the policies and problems of their home country. When the foreign firms actually are state-owned (as with DPW), and the state has either difficult or ambiguous relations with the United States, then such realpolitik thinking might even be justified.
Daniel W. Drezner is the author of All Politics Is Global (Princeton University Press, forthcoming). He keeps a daily blog at www.danieldrezner.com/blog.
Photograph of shipping container by Stan Honda/Agence France-Presse/Getty Images.