By Anthony Ogorek
Buffalo, NY – The wave of mergers and acquisitions sweeping the financial markets has ominous overtones for Western New York. Although relatively few publicly traded corporations have their headquarters in our community, the continued consolidation by publicly traded companies, is being mirrored by privately owned businesses at the local level.
For an area such as ours that is struggling with population loss, the first question our leaders should be asking is "who has an economic interest in staying in our community?" The answer is people who own closely held businesses. They cannot afford to pick up and move to another part of the country since their customers and reputation resides here. Therefore, these people are the base upon which we should be building the area's resurgence. We need to ask what we are doing to nurture and encourage the retention of local control in closely held corporations. The answer, as we will see in a moment, is not nearly enough to assure our future.
Why does it matter if local families sell their businesses to outsiders? After all, the federal and state governments will get more tax revenue; business owners may decide to spread some of that new found wealth around our community. What's not to like? Unfortunately the loss of local control is a central drawback for the Greater Buffalo area, one which is no longer dominated by large corporate employers such as Bell Aircraft, Curtiss Wright, Sierra Research, Bethlehem Steel or Goldome and Erie County Savings Bank. When there is a loss of local control of privately owned companies, it can have negative consequences for our local economic base.
When an out-of-town company buys a local business, there is frequently an overlap of jobs. Traditionally the heads roll in the acquired company. Since the new owners usually don't live in our community, the support for local causes from little leagues, to the philharmonic to sports suites may wane. Loss of local sponsorship of special events can diminish any community's quality of life. With fewer jobs at locally run businesses come fewer opportunities for our kids to remain here to raise families and expand the tax base.
All successful companies are faced with the prospect of making additional investments to maintain, as well as grow market share. With a loss of local control, that decision may be based more on a spreadsheet, rather than on a shared history of growth in our community. All things being equal, people tend to make investments close to home.
It is important for community leaders to recognize as well as support the retention of local control of privately held businesses. The policy of our Industrial Development Agencies seems to be misguided in this respect. Rather than encouraging local businesses to hop from community to community, they should enact programs that encourage as well as reward continued local control of privately held companies.
It would be interesting to know what percentage of IDA dollars can be directly related to helping to retain local control of local companies. Are there programs available to assist local companies in merging with other local entities?
All too often it seems as though we are more concerned about keeping local control of our sports franchises than our local businesses. We shouldn't want locally owned businesses to be sold to outsiders for the same reason that we do not want our sports teams sold to an outside owner - they may move the franchise to another part of the country.
Although the Sabres and Bills are entertaining; the Darwin Martin complex and the Richardson Towers are inspiring; and the Signature Span and the Skyway have an uncertain future, their economic impact on our area pales in comparison with the contribution of locally controlled, privately held businesses.
Our best bet for growing the economic base of our region is to retain local control of our existing privately held businesses. Local control drives local investment.