Photonic Mergers Cross Borders

Gaynell Terrell

Industry forces and relaxation of government rules on foreign investment helped account for a 50 percent rise in cross-border merger and acquisition activity last year, reported the Organization for Economic Cooperation and Development in its latest financial trends bulletin.

Photonics companies were a significant factor in that increase, led by the global shopping spree of Canadian optical networking behemoths JDS Uniphase Corp. and Nortel Networks Corp., which spent billions on cross-border optical technology start-ups. To name a few others, the machine vision industry also made global connections, with Waterloo, Ontario-based Dalsa Inc. focusing south and west for acquisitions of MedOptics Corp. of Tucson, Ariz., and Silicon Mountain Design of Colorado Springs, Colo. In the laser industry, Coherent Inc. of Santa Clara, Calif., purchased Optical Systems Ltd. of Glasgow, UK.

The multinational research group said cross-border mergers and acquisitions have risen fivefold in the past decade. In 1999, companies in the 29 industrialized countries that make up the organization spent about $767 billion buying companies in other countries, up from $515 billion in 1998. Companies spent billions more in direct foreign investment such as building or expanding offices and manufacturing plants.

Reasons offered for the increased cross-border activity include liberalization of governmental policies regarding foreign investment -- even hostile takeovers. Market forces, such as economies of scale, the demand for plant capacity and new market opportunities in the high-tech sector, were also cited.

Dalsa CEO Savvas Chamberlain said the machine vision company looks first to acquire other vision shops in North America, then Europe and Japan, to have the best operational fit. Government regulations or restrictions have less to do with the global acquisition market, he said. "We find it easier, cultural-wise, if [the company acquired] is in Canada or the US. The risks get much bigger in Japan. We found companies in Japan for sale at a very good price but were concerned we may not be able to integrate those companies into Dalsa," he said.

According to the research group, Japan continued to be a tough market to crack by foreign investors in 1999, although many Japanese businesses have had to streamline their operations and consider mergers and acquisitions with foreign firms in order to survive global competition.

"Through international mergers, the nationality of firms is becoming even more vague. Multinational firms are even more footloose, with terms such as "home" and "host" countries becoming meaningless. The firms themselves have facilities and employees in diverse countries, serve many national markets, and purchase supplies and components worldwide," the research group concluded.