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we do separately that together we create one great company.”
Once the two owners decided they could get along, explains Melhoff, it became a strategic discussion to ensure that their staffs and business models could also be compatible.
“For us, it was relatively easy because we had a lot of similar values and beliefs,” states Melhoff. “So it was just a way of looking at this culture and that culture, and what we needed to do to bring them together.”
Simon Neigum, left, and Jason Melhoff merged their two local businesses, Melhoff Security and ProComm Business Technology Solutions, in the summer of 2012. Melhoff Security and ProComm are long-standing technology companies in Medicine Hat.
reduce competition in the local market-place and hoping to buy growth, established networks and resources without having to build them on their own. The recent PepsiCo acquisition of Spitz Sunflower Seeds and the Aecon Group acquisition of South Rock are prime examples of this kind of thinking.
Speaking about oil and gas company acquisitions, Schulz explains this type of consolidation saves buyers money in the long-run.
“It would be the difference, say, between buying a used car at a discount now or buying a 30 per cent possibility of having a new car in five years. Most companies right now want that 100 per cent certainty.”
Ron Anderson of Meyers Norris Penny in Medicine Hat has a slightly different take on local M & A trends. He agrees oil and gas service companies are likely selling out for some of the reasons described by Schulz, but says ultimately, in his experience, the desire for stability by local owners outweighs all other M & A considerations when these decisions are being made.
“They find a larger market, more stability, product or service stability, to react to the market,” says Anderson. “Otherwise either you expand or contract, but you can never stay quite the same.”
Anderson says local service companies are often pushed by their clients into expansion and merger activities.
“Sometimes it’s about being able to offer more product lines and services. So it’s often more efficient to merge than trying to build a new service line,” explains Anderson.
Ryan Jackson’s Rameco Consulting Group advises southeast Alberta companies on the pros and cons of M & A’s. Jackson says only a small percentage of the mergers and acquisitions being discussed in the area actually carry through to the final phase.
“It’s got to be a win/win,” explains Jackson. “For example, often in a small business the biggest
detriment is its reliance on the owner to continue the relationships that business has. If it’s all tied back to ownership, and you’re purchasing the business, and the owner’s walking out the door, you really didn’t buy anything. You bought stuff.”
Jackson explains large national or international companies often want to buy out smaller southeast Alberta companies not just to take over, but to acquire what he calls “human capital.” Good examples of these kinds of M & A’s in southeast Alberta are the high profile acquisition of Joyline Transport by Flint Energy Services in 2007 and the Exalta Transport buyout by Manitoulin Group in 2011. However, says Jackson, the majority of M & A’s in the Medicine Hat area do not cause the big splash those deals did.
“M & A activity in the area is actually pretty muted. And those that are occurring, it’s all about human capital, quite frankly. Anybody can buy the metal or the building — it’s the people they are after. The majority of what I am hearing from the guys doing the acquiring is that as much as they like the equipment, they like the people who are operating the equipment. It’s the skill-set you don’t just acquire overnight.”
Jason Melhoff and Simon Neigum merged their two companies to form Pro Comm Solutions Inc. in Medicine Hat in 2012. Melhoff ran a software, security systems and surveillance company in Medicine Hat prior to the merger. Neigum’s business specialized in telecommunications, wireless and customer service. By bringing their two businesses together, Melhoff and Neigum can now offer more products and services than they could individually. Neigum and Melhoff discussed the merger for six months before signing on the dotted line. Neigum makes the analogy of the process being like dating to see if the owners were compatible prior to the marriage of their two companies.
“We really felt with the complement of services we could offer it really made a lot of sense for us,” says Neigum. “Our visions were similar. And it felt very much like a marriage where there’s some things
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Melhoff admits it took some time for that transition to occur, but nearly one year later both he and Neigum have tremendous optimism for the future of Pro Comm. Pro Comm will be opening their new, larger store location at the former Melhoff Security building in Medicine Hat on April 1, 2013.
“In business there is always going to be highs and lows; that’s just the way the beast works,” explains Melhoff. “But if you have someone to grow with who has that similar mind-set, you can go through anything.”
Given all the varieties of M & A’s possible, and a world market which continues to be chaotic for investors, Bob Schulz says he would not be surprised to see some more big deals go down in the near future: Buying companies and services right now, explains Schulz, is more profitable than buying stocks.
“If the price is right,” states Schulz. “Because the markets have been quite uncertain, and the rates of return relatively low, there’s a lot of cash sitting on the sidelines asking now what are we going to do with it? Takeovers and M & A’s should become more common.” ■
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