“BLOGGO PLC”, announces its press office at 7am, London time, “last night agreed to purchase Junko Inc, of Wichita.” A quote from Bloggo's proud chairman sets out how well the American purchase fits the British buyer's strategy. And the British shareholder, if he is wise, heads for his broker and the exit.
That, repeatedly, has been the lesson of British incursions into the United States: from attempts in the 1950s of firms like Austin and Morris to sell their utterly ill-suited and often ill-built small cars of the time, through European Ferries, which in the 1980s bought up several thousand acres near Denver, presumably without asking—until it went all-but belly up—whether a cross-Channel ferry firm really knew more about land in Colorado than local real-estate buffs did.
Even in the later era of serious direct investment, British incursions have had a spotty record. Two academics at Xfi, Exeter University's new finance and investment centre, have now put figures on it. Alan Gregory and Steve McCorriston studied 197 British takeovers in America, nearly all the significant ones, in manufacturing and services (banking excluded) in 1984-94. Over a five-year period from the purchase, they found, the cumulative return to shareholders was 27% lower than “normal”—ie, for similar companies that had stayed at home—and notably worse than the trivial difference over one year that stockmarkets (and academics) have tended to look at.
The figure was also in notable contrast to comparable ones from 97 takeovers in the European Union, and 39 elsewhere in the world. Returns in the EU looked better than normal, but the figures were not statistically significant; those in the rest of the world were both, 32% better.
You might expect the opposite, given that Britain's corporate culture is much like America's, but some way from those of most EU countries. So why the unexpected outcome? The Exeter academics do not know, but would love to find out—if they can get the research funding.