Investors may be spitting blood in the wake of a $77 million takeover bid for Software of Excellence (SOE). American healthcare mammoth Henry Schein cites “cross selling opportunities” as the fundamental attraction for absorbing the newly profitable dental software provider. Are they serious?
Henry Schein is a Fortune 500 company with 12,000 employees across 19 countries and a multi billion dollar turnover. Why are they interested in a tiny software company from the other side of the world? The answer is that the cheapest way for a large U.S. company to innovate is to simply buy in what it needs to dominate a global market whilst simultaneously smothering the competition. That strategy makes a lot of sense – for them.
One doesn’t need to look far afield to find several recent examples of American corporations swooping on New Zealand technology firms, buying up the intellectual property and then shutting down the local side of the business. That’s fine if you are a foundation shareholder looking for a nice fat return, but it doesn’t help the economy much. Jobs are lost and profits head offshore. Sound familiar?
But, I hear you say, haven’t cashed up entrepreneurs reinvested into new ventures? Yes they have, but most of those new companies have not yet made a dollar in profit and some possibly never will. For every headline sale of a tech company abroad, there are a hundred firms that never make it. I guess the question we have to ask ourselves is a simple one. Is it an acceptable model for NZ to be an ideas incubator to the rest of the world and for us to accept that we have neither the organisational heft nor the capital required to fully exploit global markets?
Perhaps incubation and sale is a perfectly acceptable model? But it seems to me that you need to be sequentially churning out lots of quality ventures to make that model work for the broader economy. I don’t think we are quite there yet. Whatever happened to the plan to build and grow 100 by $100 million tech companies?
Considering some of the other recent trade sales, $77 million seems a little on the light side. I hope SOE shareholders don’t sell themselves short.
Excellent post and you’ve hit the nail on the head. It’s not going to be a popular theme, challenging as it does the aggregate value of some of our success stories – but it’s a dialogue which needs to be entered into.
Well done!
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Thanks Ben. I didn’t enter into this conversation lightly and I certainly don’t wish to devalue all the hard work that some very smart people have put into realising value from their tech ventures.
I’m feeling a wee bit like a contrarian at the moment. But having contributed much of my spare time over the last five years to building and managing networks in the technology sector, I am disappointed about how little progress we seem to have made in terms of “Growth and Innovation”.
I believe one or two other commentators have expressed similar disquiet.