Over the past while here at The Telecom Blog, I have had the misfortune of observing Canada’s sell-off culture and the impact it has had on the country’s telecommunications and tech industry. Once a global powerhouse in innovation in the sector, Canada recently slipped to the middle of the pack and the recent rash of takeovers and sell-offs can’t be improving that picture.
The latest domino to fall is Montreal’s 20-20 Technologies Inc.
The name may not seem like much, but the sale of 20-20 Technologies to San Francisco private equity firm Vector Capital Corp. symbolizes a trend that has seen 45 Canadian tech firms get taken over by foreign buyers last year alone. Prior to that, 32 tech firms left Canada.
Now, tech-related firms account for just 1.6 percent of the TSX composite. In July of 2000, tech firms accounted for 41 percent.
When you consider the trouble that Waterloo’s Research In Motion is in and you add in the unfortunate fate that Nortel experienced, it’s hard not to look at things in the Great White North as being quite bleak. While the carriers snap up media companies and improve their profit pictures, the innovators of Canada’s landscape are on the endangered list.
On the list of recent takeovers is Montreal-based Miranda Technologies, which went to St. Louis’ Belden Inc. for $345 million. Vancouver’s Singular Software, Halifax’s Golstant and Ottawa’s Headwall Software also found themselves sold to American companies.
The 20-20 deal went down for $77 million, amounting to $4 per share – a 28 percent premium over the company’s closing share price in April.
20-20 Technologies is probably best known for creating and producing 3D animation over the Internet. It helps clients personalize their products and produces a system for creating interactive 3D animation.
Over recent months, there have been reasons to remain at least somewhat optimistic. Canada’s venture capital picture has improved somewhat, but the sell-off culture continues to offset any innovation ground that is made up. With RIM’s impending and unavoidable collapse playing out before our very eyes, it’s hard to imagine that the country can recover.
When foreign companies are offering deals at a premium to companies like 20-20 Technologies, it’s hard to say no. Canada’s fiscal prospects must rally and there must be room (and opportunity) for development on home soil if local corporations are to be expected to endure. Creativity isn’t a problem for Canadians, but the enticements of money and opportunity in other markets are proving hard to resist.