Mergers mean loss of local ownership

In 1987, consumer products giant Colgate-Palmolive made an offer which the stockholders of Vipont Pharmaceuticals Inc. couldn’t refuse.

Colgate paid $88 million to buy the upstart Fort Collins-based company, which had developed a toothpaste — Viadent — that was beginning to gather momentum in Colgate’s market.

The deal enriched a number of local shareholders, and seemed to have long-term value for the local economy. Colgate executives said the new owners wanted to develop the Vipont subsidiary as a research and development center for oral care products.

Colgate’s actual intent may remain a mystery, but Vipont’s status in Fort Collins is not. The parent company shut down the Colorado operation within three years of the purchase, eliminating dozens of jobs in Fort Collins and consolidating the Viadent business back at Colgate headquarters in New York.

The Colgate-Vipont story reflects a worst case scenario of how a merger, and the subsequent loss of a local corporate headquarters, can undermine the local economy.

Decision-making was taken out of the hands of Vipont’s Fort Collins leadership. Eventually, the operation that was distant from corporate headquarters was deemed expendable.

Following a wave of mergers since the mid 1990s, growing numbers of one-time local companies have become divisions or subsidiaries of out-of-town owners.

Among the local firms that have sold to out-of-state ownership include American Educational Products, Avert Inc., Center Partners, Comlinear, Deline Box, Duke Communications, Factual Data, Hach Co., Ion Tech and Kota Microcircuits.

So far, the Colgate-Vipont example has not been repeated in Northern Colorado, although several of these same companies have seen their payrolls cut dramatically.

Even when jobs aren’t lost, the trend away from local ownership can have other unsavory aftertastes.

“It can be pretty profound,´ said Gerard Nalezny, president of Community First National Bank in Northern Colorado and past chairman of the Fort Collins Area United Way.

First, the company’s highest-paid employees work at the headquarters. “Those are the folks that buy the million-dollar homes,” he said.

Companies based in a certain city or geographic region tend to concentrate their philanthropic interest in the same area. The result, Nalezny said, is “community capital.”

“More high-powered people aren’t just making more money, but they are also the types of folks who provide intellectual capital to the community. Those are the ones who don’t just give money to United Way but actually end up being on the board.”

Headquarters also lure business travelers, which support restaurants and hotels.

Corporate headquarters also bring stability.

Hometowns are often the first place to expand if the company’s doing well and the last place to lose jobs if the company is struggling.

“A majority of them would tend to save face with the people they have to walk past every morning,´ said Donna Smith, economic development manager for the city of Loveland. “It’s easier to make cuts somewhere else.”

A healthy roster of corporate headquarters can spin off other benefits. Local banks are more likely to prosper with corporate clientele, and business vendors have a better opportunity to land supply and service contracts.

Good news, bad news

Northern Colorado isn’t alone in feeling the loss of corporate headquarters.

Denver has seen major corporations like AT&T Broadband, Xcel Energy, Chateau Communities and J.D. Edwards give in to mergers.

Unlike Denver, Northern Colorado’s cities aren’t necessarily battling for prestige.

“I think that’s less important here,´ said Stephan Weiler, co-director for the Center for Research on the Colorado Economy, located at Colorado State University. “This is not the kind of community where you would expect a bunch of corporate headquarters.”

In fact, the ability of homegrown Northern Colorado firms to attract out-of-town suitors reflects well on the business climate here, Weiler said.

“It speaks to the fact there’s some success going on here,” he said. “Some of Colorado’s traditional strengths are from the fact you can keep a good workforce here. It’s easier to maintain an operation where people are likely to stay. It makes it easier to transfer people in.”

Mergers can also foster new growth, if the former company owners reinvest with their new capital, said John Green, a regional economist who compiles The Northern Colorado Business Report Index of Leading Indicators.

“If they did that, that’s really good for our economy here,” he said.

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