Foreign Acquisition in Canada’s Tech Sector

Instead of bemoaning foreign acquisitions, Canada should figure out why these startups cannot get funding in Canada,

Mike Dover, research director and senior consultant at J.C. Williams Group, has authored many business books, including “Wikibrands: Reinventing your Business in a Customer-Driven Marketplace.” The portability of IP compared to physical assets makes technology startups “more attractive” to acquirers, Dover said. Erin Leydon

Barely a day seems to pass without a Canadian technology company being bought by a foreign giant. The latest in the string of acquisitions is Montreal’s 20-20 Technologies, a platform for the interior design and furniture industries, purchased by Vector Capital Corp.

With Research In Motion Ltd. (RIM) battered by sagging stock prices, mass layoffs, and product delays of its crucial BlackBerry 10 model, many are worried that RIM would fall—and that if it does, there would be no Canadian-owned company left to take its place.

Despite RIM’s decline, it still topped Branham Group’s list of top 250 information and communications technology (ICT) companies in Canada. With the big three wireless and Internet companies—Bell, Rogers, and Telus—rounding out the top four, no upcoming technology company seems ready to take RIM’s mantle.

According to a report from the Information Technology Association of Canada (ITAC) with research from Branham Group, 45 Canadian technology companies were acquired by foreign firms in 2011, up from 2010’s 32 and the under 20 of previous years.

Views on impacts vary

While it’s clear foreign acquisition happens, its impact may not be negative.

Stuart MacDonald, chief marketing and revenue officer at FreshBooks and veteran entrepreneur from Expedia.ca, said that “It’s great Canadian businesses are getting acquired, if that’s what their owners want.”