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Big-name powerhouses dip into Madison business pool, stay here
(Wisconsin State Journal, The (KRT) Via Acquire Media NewsEdge) Jul. 29--Powerhouse companies are focusing on the Madison area for acquisitions, and not just to steal away their Midwest technology and talent.
A string of local companies purchased over the past two years features buyers with big names, including Roche and Microsoft.
Other high-profile companies also have gained a presence here over the past few years, including Amazon, Google, Sony and Shell Oil.
A few years ago, being acquired by a bigger corporation often resulted in gutting the local work force. Now, employment is more likely to stay here and grow.
"We've entered a new chapter," said Jim Leonhart, executive director of the Wisconsin Biotechnology and Medical Device Association. "Larger companies are not just looking to acquire someone but in fact, they are interested in expanding into this area."
Much of the new wealth showered upon investors in the acquired companies is staying in Madison area, local experts say, often funneled into other local tech startups.
"A lot of (investors) say: Let's turn that over and ... look for another success," said Terry Sivesind, who calls himself a "bioentrepreneur." He co-founded Wisconsin Investment Partners, an active, local network of individual investors.
Powerful parents
Several Dane County companies have gained powerful new parents in recent deals:
--Swiss drug and biotech giant Roche announced last week that it plans to buy Mirus Bio Corp., 505 S. Rosa Road, for $125 million. Roche says it will keep a research and development operation in Madison for at least three years, to continue Mirus' work on RNA interference -- or gene silencing -- as a potential platform for a new class of drugs. Forty of Mirus' 60 employees will be part of that; the other 20 will split off into a separate Madison company that will sell Mirus' research products.
--Hologic, a leading developer of diagnostic and imaging products for women's health care, completed the purchase last week of biotech Third Wave Technologies, 502 S. Rosa Road, for $580 million. Hologic, of Bedford, Mass., says it plans to keep most of Third Wave's 180 employees and is considering bringing production of one or more of its other diagnostic products to Madison.
--NimbleGen Systems was bought by Roche in August 2007 for $272.5 million. Employment is up 40 percent, to 143 from 103 a year ago, and an addition is being built at 504 S. Rosa Road, in the Third Wave Technologies building, part of which NimbleGen already occupies.
"They are bringing us into the fold, helping us to grow and to focus our product and research and development efforts," spokeswoman Joleen Rau said. "As far as I know, they're committed to staying here."
--Jellyfish.com, a comparison-shopping online search engine and social network, became part of Microsoft in September 2007, just one year after opening. The exact purchase price was never disclosed, but sources indicated it was around $50 million.
The Middleton company, at 1600 Aspen Commons, had 26 employees at the time. Since then, Jellyfish has added 26 temporary employees for customer service, technical development and adding to the merchant base. Full-time staff is down to 18, partly because founders Brian Wiegand and Mark McGuire left the company in May to start another business. Wiegand said, though, in his last communication with Microsoft, the software giant said it is seeking a new general manager here and "will continue to invest in Madison."
In an unrelated move, Microsoft announced in April that it will team with the UW-Madison computer science department to open a first-of-its-kind advanced database development laboratory.
Google said it, too, will open an office in Madison to tap local talent.
They join Amazon.com, which bought Madison online clothing retailer Shopbop.com in 2006 for an undisclosed amount.
Sony has been here even longer. Its Sony Pictures Digital Networks bought the audio and video editing software products of Sonic Foundry in 2003 for $19 million. The Madison Sony business is now the worldwide headquarters for Sony Creative Software.
Other companies have made big investments in Madison companies without buying them.
Virent Energy Systems, for one, has drawn support from subsidiaries of Honda, Cargill and Shell Oil in its effort to develop biofuel from plant sugars.
Plugged in
Getting the attention of major corporations is a sign that "Madison is plugged into the global economy," said Tom Still, president of the Wisconsin Technology Council. "It says that our technology-based economy is maturing. We have moved well beyond this being a startup-only economy."
But a UW-Whitewater economist suggested there may be more mercenary reasons for global corporations to look here.
"The whole value of the dollar makes American firms cheaper," associate professor Russell Kashian said. Because of the trade deficit, a huge amount of U.S. dollars has gone overseas.
"They're not coming back to buy Chevrolets or wheat. They come back (to) buy fixed assets: companies," Kashian said.
When that happens, upper-management jobs can disappear, and with them go local control and good corporate citizens needed to support local nonprofit groups and events, he said.
At the same time, though, having a company such as Roche buy two Madison biotechs in a year can do wonders for the area's reputation, Kashian said. "Also, Roche's ability to get capital and invest it is quite high. They could easily expand the facilities in Wisconsin without any problem getting external money.
"The question is: Will they do it?" he said.
More companies
Even if Roche doesn't, many Madison area investors are pumping their gains into additional companies.
Jellyfish was the second company Wiegand and McGuire started together. Their first joint venture, NameProtect, which researched trademarks and scoured for online brand-name abuse, was sold to Corporation Service Co., Wilmington, Del., last year for an undisclosed amount.
Wiegand also started a third company, Business Filings, with a different business partner. It was sold to a Dutch publishing firm in 2002 for $14 million.
Now, Wiegand and McGuire have formed a new shell company, with six employees but no name. It will be another consumer-oriented, e-commerce business, but "dramatically different from Jellyfish," Wiegand said, but declined to disclose details yet.
Selling Jellyfish netted Wiegand and McGuire $12 million each, and of the company's approximately 100 local investors, "several millionaires were made," Wiegand said. "They all have the entrepreneurial bug. I have a sense that some of those will turn into new businesses."
Mark Gehring and Praveen Sinha, co-founders of UltraVisual Medical Systems, a medical imaging systems company, each helped start new businesses after UltraVisual merged with Emageon, of Birmingham, Ala., in 2003.
Gehring is now involved with Sharendipity, which lets average people write computer software, while Sinha is part of NovaShield, which is working on computer security technology.
Building on success
Initial public stock offerings have streamed profits through the tech community, too.
Bruce Neviaser, former board chairman of now-publicly traded indoor-waterpark developer Great Wolf Resorts, is a principal in Continuum Investment Partners, a Middleton angel network. Continuum has invested in Cellectar, a Madison company developing cancer-fighting drugs.
Thomas "Rock" Mackie is another Cellectar investor. Mackie is a co-founder of TomoTherapy, the Madison company that makes radiation cancer treatment machines and went public in 2007. He's also involved in Compact Particle Accelerator Corp., a newly formed cancer radiation venture using proton therapy.
Success breeds success, Mackie said. "The more companies that are successful and give real paybacks to their investors, the more likely those angel investors are to put that money to work starting new companies," he said.
That's what happened in California's Silicon Valley, North Carolina's Triangle Research Park, and suburban Boston and San Diego, all home to "generations of successful entrepreneurial companies," he said. "Madison is just in its infancy in that (process)."
To see more of The Wisconsin State Journal, or to subscribe to the newspaper, go to http://www.wisconsinstatejournal.com.
Copyright (c) 2008, The Wisconsin State Journal
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