LOUD and CLEAR from DENZIL DOYLE

There is nothing wrong with our technology or the people who develop it. It is the financing industry that is broken.

A few antidotes to the hollowing-out trend
From SCAN's Print Edition

The concern over the Doyle%2C%20Denzil-120X185.jpgsellout of corporate Canada is obviously increasing. On July 27th, 2007, a Globe and Mail article by Thomas Caldwell, chairman of Caldwell Securities Ltd. outlined some fresh approaches to dealing with takeovers. He specifically addresses takeovers that are initiated by the boards and management teams of Canadian companies, not because they are good for the shareholders or for Canadians, but because they result in huge bonuses, stock option benefits and retirement packages for themselves. He states, “If we wish to stop the sellout of corporate Canada, a start would be to prohibit managers from receiving bonuses or exercising options if they sell the corporations they were hired to run and build.”
While such ideas may seem drastic to the disciples of market freedom, they are food for thought. I would go even farther and put limits on the amount of money that the mergers and acquisition firms and the lawyers and accountants could take off the table.
As I have stated in previous articles, what has been going on in the world of high technology is sheer madness. We are spending billions on publicly funded R&D and technology transfer facilities and more billions on industrial research incentives, only to build an R&D farm team for the U.S. If there is one thing that should be obvious to those who are in the middle of it all, it is that there is nothing wrong with our technology or the people who develop it. It is the financing industry that is broken. While the Canadian pool of buyout capital has been increasing, it is managed by people who are pretty indifferent about high tech. And we do not have enough large companies that can act as strategic buyers.

The week after Mr. Caldwell made his suggestion, two events occurred that sounded a welcome note of comfort for those of us who feel it is important that Canadians get to manage something more than R&D branch plants. One was the approval by the shareholders of Inter-Tel Inc., an Arizona-based company, of a takeover by Mitel Networks. The other was the purchase of Med-Eng Systems by Allen-Vanguard. In both situations, the head office will remain in Canada. Both will be multinational companies that will give Canadians an opportunity to gain head office experience. They will also act as buyer/receptors for smaller local companies and therefore provide earlier stage investors (i.e. angels and venture capital companies) liquidity opportunities. These opportunities have been scant in recent years, leaving a lot of early stage money locked in long past the expected exit date. Getting it out means it can circulate again, something that is essential to make the whole system work.
Hopefully we are seeing the beginning of a trend that will make it unnecessary to invoke measures of the type being advocated by Mr. Caldwell. Meanwhile, they should not be dismissed too hastily.

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