Are going-out companies paying too much?

In the late 1980s, Japan had over-inflated stock and property markets. Its companies, fleeing the lack of opportunities in Japan itself, vastly overpaid for all manner of US assets. I often dreamed that some Japanese investor would overpay for the house I owned at the time.

The rate of Chinese companies making overseas investments has more than doubled since last year. They often have a business model designed to bring technology and foreign business practices to the huge domestic Chinese market - a much better-defined plan than the Japanese, who were mostly purely financial investors, ever did. But, still I worry that they are paying too much.

Let's take a look at a recent deal. Beijing-based LeEco Global Ltd announced last Tuesday that it agreed to pay $2 billion cash for Vizio Inc, a California-based manufacturer of inexpensive television sets and sound bars. This at a time when the dollar is high relative to the yuan. LeEco argued that Vizio will enable it to gain market share in the coming internet-of-things technology that links all kinds of smart products together. And, it certainly may turn out in that LeEco made a smart move in the long run. But, I still wonder about the pricing.