Guess who is buying America?

A poster asked me to comment on Richard Florida’s blog called Guess who is buying America? So, I will.

First, foreign acquisitions by themselves are not greenfield foreign direct investment. I don’t have a problem per se with what you see in Florida’s charts but it is not the same thing. What I am calling for is greenfield multinational investment in New Brunswick. New manufacturing plants. New data centres. New animation studios. New back offices.

Second, this trend in the charts is directly related to the decline in the U.S. dollar which makes American firms relatively cheap. However, make no mistake, the U.S. is an FDI powerhouse attracting tens of billions in new, greenfield investment each year.

Third, I certainly don’t advocate concentration of ownership in any area. I have said many times before the concentration of power- political, economic, social or religious – can lead to abuse. Remember Lord Acton. So if sovereign national funds are taking concentrated positions in firms, I would be concerned. As long as the ownership is relatively spread, no problem. They worried about Japanese ownership in the 80s. Now they are worried about the Chinese. Maybe the Brits are next.

Fourth, I am not opposed to foreign purchases of New Brunswick firms. There are positives and negatives. It is true that decision making shifts out of province. It is true that the risk of higher paying jobs could migrate out (senior management). But on the plus side, I think it is about time to unlock some value. This is healthy. When Speilo sells, some of that capital gain finds its way into the local economy. The lack of publicly traded firms in New Brunswick, has inhibited wealth creation. As an example, if I own a $100 million firm – family business -and I harvest a million bucks a year out as profit – that’s a good thing – particularly if I share some of that with my workers. However, if I never give out equity or take the thing public, I never monetize the value of my firm. In other words, on paper I am worth $100 million but not in practical reality. Then, when some bubble hits and I go under, that value is wiped out. Again, I understand the nuance to this but, in general, I would like to see more IPOs, more targeted takeovers, etc. to slosh some more wealth around and give us better exposure to a wider market.