European Debt Crisis Offers Opportunities for US Companies

Baron Rothschild, an 18th century British nobleman, said, “the time to buy is when there’s blood in the streets.” Rothschild knew what he was taking about. He made his fortune buying in the panic that followed the Battle of Waterloo.

The current panic involving the EU debt situation won’t be resolved overnight and risks of the crisis getting worse are very real. However, it appears the EU political and business leaders (including those in Germany) remain committed to insuring the survival of the EU and the euro currency.

Even so, many global financial experts are continuing to worry about: 1) whether Spain and Italy will default (whose effects would be far reaching); and 2) whether the German public will continue to support the bail out of the weaker members of the EU.

An important question for US companies is: how can they take advantage of the current uncertainty in the European business market?

The debt crisis will put pressure on some European companies to divest assets

We believe there’s going to be many more opportunities for U.S. companies in Europe because ultimately when countries get squeezed, banks get squeezed and then corporations’ credit get squeezed. As a result, those companies are going to look for financial help or are going to need to divest assets.

A weaker euro means U.S. companies can acquire European companies for less

Many currency experts are predicting that the European debt problems will cause the weakening of the euro currency against the US Dollar. If the euro weakens, US companies will be in their best position in years as pertains to the purchase of European companies. Indeed, we are noticing a growing number of U.S companies looking to expand in Europe through acquisitions.

The recent decline in European stock values provide a buying opportunity

While it is not certain how long the current drop in stock values will last, no one is predicting a return to the high levels we saw earlier this year anytime soon. Many US companies have strong balance sheets and cash reserves. In the short term, the combination of a weaker euro, slowing economic growth and depressed stock prices provide a “perfect storm” of elements that favor opportunistic acquisition activities.

Despite slower growth Germany remains a very attractive investment location

Germany remains the most popular investment location in Europe because of its continuing financial strength and political stability. Even with slower than predicted growth, the German GDP is still expected to grow 3% in 2011. If only the US had the “problem” of 3% growth!

The European debt crisis is a very fluid situation. The heated debates between EU countries and Germany on the solution will continue to cause unrest in the global financial markets. However, the current financial panic offers a tremendous opportunity for US companies looking to buy in Europe.