Economy and Economic Development and Small Business and Sports Business

DIFFERENT TAKES: IS IT IMPORTANT FOR COMPANIES TO STAY LOCAL?

September 18, 2006

Mergers not only good for investors Keeping local roots is high priority
DIFFERENT TAKES IS IT IMPORTANT FOR COMPANIES TO STAY LOCAL?

When entrepreneurs or investors start companies, they do so with a goal in mind. That goal might be to create jobs, create value for investors or shareholders, develop local talent, build long-term capabilities for the company and the state's economy, produce a profit, or all of these.

Chances of success rise as we embrace the idea of an open economy that rewards business leaders and entrepreneurs, venture capitalists or companies for their investments. Without incentives to make money, why make the investment?

The capital we are trying to attract is not just Indiana dollars. While we want most deals to transpire in the state, economic development is about partnerships and profitable ventures for out-of-state partners as well. Successful ventures like Suros Surgical Systems will increase the money available by out-of-state investors and will establish a track record that investing in Hoosier businesses is a good idea and good for Indiana.

Announcements that an Indiana company is merging or being acquired by an out-ofstate company cause people to hold their breath and wait for the bad news-job cuts, company closures, lost revenue and a list of reasons why mergers are bad. That's a onedimensional view of how the state's econo my works. We can't be so focused on a single outcome of M&As that we lose sight of effectively competing in today's economy.

The July 27 announcement that Suros merged with Massachusetts-based imaging leader Hologic is good news for employees, shareholders, investors, the state's economy, suppliers, and patients.

The sale or merger of a company falls into three categories:

Sale where company stays in state, employees stay and company builds from foundation already in place; shareholders and investors are rewarded. This scenario is great for everyone. It's the model Suros followed with its Hologic merger. It means rewards for investors, product suppliers and every employee from production operators to executive management. The state continues to see job growth and economic development, and opportunities exist for college graduates to find in-state jobs.

Sale where majority of the company stays in state, but headquarters is moved and jobs are lost. Shareholders and investors are rewarded with a positive return on their investment, the majority of the work force remains employed, and the state keeps a growing tax base.

Outright sale where a company is acquired and moves its jobs out of state; shareholders/investors are primary beneficiaries. This may show a negative impact on the state's job growth initially, but can net a positive inflow of capital by those that can benefit from an Indiana investment, which stimulates development, produces reinvestment in startups, and supplies management talent with new opportunities.

We need to be comfortable with multiple merger outcomes. Each one stimulates an important part of our state's economic-development cycle. Certainly, we should provide the best incentives and rewards for investors and companies that create and continue to build job growth in Indiana. But we should not ostracize those that do not bleed Hoosier blood with every business decision.
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Jim Pearson is president and CEO of Suros Surgical Systems Inc.

There's something missing from your local TV channels, something that's nearly disappeared from your radio dial, too: local ownership. Emmis Communications Corp., which operates WIBC-AM 1070, WYXB-FM 105.7, WLHK-FM 97.1 and WNOU-FM 93.1, is the only locally owned commercial broadcaster left in Indianapolis.

It's no secret that I recently made an unsuccessful bid to take Emmis private. During that process, there was controversy in some quarters about the fact that the company didn't consider offers from outside buyers. I make no apologies for that decision, because I don't want this company, a local fixture for 25 years, sold to outsiders and its headquarters moved.

Does it matter whether your news and entertainment sources are locally owned and operated? I would argue that it is vitally important, for a host of reasons. But the issue of out-of-state firms acquiring local companies is bigger than the fate of just one company and its employees. Certainly, there can be short-term benefits to some people if a company is sold to outsiders. But over the long term, the view I prefer to take, the impact is different and broader. Whole communities lose taxpayers, leaders, volunteers and donors.

Over the years, Indianapolis has lost a number of corporate headquarters to acquisitions. Most recently, we've seen Guidant Corp. and Suros Surgical Systems swallowed up. Sometimes, after a sale, portions of the operations remain here, but headquarters and top executives get shipped to other communities.

And then we see the impact. Brilliant men and women disappear from community boards, their leadership lost forever. Operations people sell their homes and follow the jobs out of town. Charitable organizations see support funds redirected to the new headquarters' community. I'm tired of seeing that happen to my hometown.

I don't mean to demonize anybody who sells a company-there are myriad reasons for doing so. But it's hard to match the positive impact a home-grown operation can have on its community.

Emmis employs hundreds of people who live in Indy, buy homes, pay taxes, volunteer and contribute to the community in countless other ways. We inform and unite residents in times of need. We support charitable organizations that serve millions of people each year. We encourage small businesses and help drive economic development. We respond to tragedies, promote the arts and rally the community behind its beloved sports teams. When I consider what this one company does for Indianapolis, I'm convinced that each headquarters lost is one too many.

My family has called this city home for more than 100 years-my roots run deep, and so do my passions for central Indiana. And I hear often from Emmis employees who feel the same way. We've built our careers and families here, and we want to build a community where our children and grandchildren can do the same.

Can there be a short-term gain from selling off companies? Absolutely. But if you balance that against the lost passion for the community, and all the things that passion generates, I think you come out in the red.



Jeff Smulyan is chairman, president and CEO of locally based Emmis Communications Corp. Pearson Smulyan
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