On takeovers

David Olive points out that contrary to the usual protestations about Canada failing to attract investment, we've in fact already been subject to far more foreign takeovers than most of our international competitors would be prepared to allow:

Throughout Europe, the European Commission's burgeoning anti-trust bureaucracy nit-picks not only domestic and cross-border mergers on the Continent, but has twice thwarted planned combinations of American firms that do business in Europe — a form of the dreaded "extra-territoriality" of which the U.S. is more often accused. No amount of lobbying in Brussels by then-CEO Jack Welch could move the EC to approve General Electric Co.'s planned merger with Honeywell International Inc. And it was the EC's blocking of a WorldCom Inc. merger with Sprint Corp. (now Sprint Nextel Corp.) that ultimately exposed WorldCom as an accounting scam, reliant on ever-larger takeovers to maintain the illusion of growth, and triggering WorldCom to file the biggest bankruptcy filing in history.

The United States has its "poison pills" by which domestic firms can thwart hostile takeovers, often in the form of laws passed by the local state legislature. China demands local part-ownership not only of acquisitions of Chinese firms but of newly launched enterprises financed by offshore interests. Remnants of command-economy practice continue to discourage offshore acquisitions of local assets in India and Japan. Takeovers and start-ups financed by foreigners in Russia and developing world countries are routinely subject to expropriation or reneging on contracts on government orders.

By any comparative measure, Canada is an acquisitor's paradise. We have no "industrial policy" worthy of the name, no ambition to create "centres of excellence" in R&D and manufacturing with which proposed takeovers in most European and Asian countries are expected to conform...

As an experiment, it would be interesting to gauge the U.S. reaction to the foreign takeover, in the space of nine months, of U.S. Steel Corp., J.C. Penney Co., Intel Corp., Walt Disney Co., Marriott International Inc., Hilton Hotels Corp. Phelps Dodge Corp. and Limited Brands Inc. (Victoria's Secret) — the rough equivalent of the type and size of Canadian firms that have lost their independence to foreign decision-makers since the beginning of this year. The effect might be just a bit jarring for our U.S. friends. Certainly it would at least raise questions about the logical outcome of such a trend.

Which is not to argue that a proliferation of proud Canadian firms slipping down foreign gullets is a bane to our industrial progress (a subject for a different column). It is to say that Canada, contrary to your local Chamber of Commerce's claptrap about unsupportable tax burdens and stifling bureaucracy, is viewed by outsiders as a great place to do business. And with its relative lack of economic parochialism, it is probably the world's happiest hunting ground for takeover artists.

Of course, that same claptrap also seems to be the main motivating belief for our current Finance Minister. But there should be no doubt that Canada has done plenty already to stimulate foreign investment, with little regard to whether the country is ultimately better off for those takeovers. And given that such an attitude sticks out like a sore thumb among developed states, it's worth wondering whether we should be paying closer attention to the costs and benefits involved in takeovers (on social and economic rather than ideological lines) rather than seeking to hurry up the process even more.