Sell! Sell! Sell!

I recently heard that Moncton-based Hi-Tech Gaming was being acquired by Nevada-based IGT. This follows the blockbuster acquisition earlier of Speilo Manufacturing by another U.S. company, GTech.

Some economic developers shudder when they hear that a locally owned and controlled company is being taken over by a foreign company. They fear that the commitment to the local market will wane as the power base of the company shifts to another community – typically in another country.

I, on the other hand, applaud these moves. This is one of the best ways to attract foreign investment into the community. This is beneficial in a number of ways including:

  • The new money coming into the market may be spent by the sellers in the local market (they usually build large new houses and purchase waterfront property – which is good – but I am talking about investing in other companies in the community that need the money).
  • With each acquisition more and more foreign companies are getting to know our market and its strengths – this in the long run will raise awareness of the community.
  • If Moncton is a good place for business – and we think it is – these companies become prime targets for further investments (i.e. Speilo hopefully will become a major manufacturing centre for GTech).
  • These foreign companies bring much needed expertise and know-how into the local market.
  • Finally, and crucially, these foreign companies open up new markets and marketing channels for the products and services developed right here in Moncton.

So are the naysayers right to be worried? Yes. Many times companies buy out firms and then close them or downsize them. It is a common occurrence. However, the risks associated with not becoming a global city; of not attracting foreign investment; of not leveraging these relationships into new jobs and economic opportunity are far too great.

So I say bring them on. I encourage all of Greater Moncton’s locally owned firms to consider bringing in external investment and expertise. This will bring much needed investment capital into the local market and give some form of payback for all the entrepreneurs who have been slaving away for many years for only a limited return.

I once heard a story of two partners in a local business who quarreled and separated the business into two different companies. The one partner sold 50% of his company to a Toronto-based investor. This partnership opened up significant new markets and opportunities for the Moncton firm as well as brought in much needed management expertise. In addition, it put several million into the pocket of the Moncton owner who then spent a large portion of it in the local market. The other partner would not give up any control and has not expanded, not generated any new investment and is plodding along trying to generate wealth out of limited after tax profits. Which scenario is better for the community? The one that led to millions of new dollars spent in the local market and to the expanding of the business or the one that has led to minimal growth and no new investment?