Beyond the Headquarters
In recent months, I’ve discussed in these pages and elsewhere the business community’s growing concern that Minnesota appears to be losing business headquarters faster than it’s growing them—a reversal of fortune from the 20th century, and a huge factor in building the state into what it is today.
The state has for years touted that it leads the nation with the most Fortune 500 companies per capita. That number is slipping, though, from 21 in 2010 to 17 this year—hence our May cover story, “Taken,” on this subject. In just the past 12 months, we have lost five well-known headquarters: Fortune 500-level St. Jude Medical and Valspar, and smaller but still significant, Arctic Cat, Capella Education and G&K Services.
Headquarters operations are home to individuals who help to improve our economy by growing their businesses and, often, helping others to grow theirs, with advice, investment, board service or subcontracted work. They also help improve our communities through service on nonprofit boards, donations to charities and the arts, and, of course, treating their employees well, culturally and financially.
The concern is that as we continue to lose larger corporate headquarters, we also lose top-tier leaders in Minnesota. The question then becomes whether we’re losing more headquarters—and publicly traded companies—than we’re able to cultivate after a century of success.
We’re going to try to answer that question in the coming year. But between now and then, I thought it would be good to note that we also still have plenty of company headquarters that are expanding, and, just as important, we have hundreds of significant employers that continue to invest here even though their headquarters are elsewhere.
In the 1980s and early 1990s, the media reported on M&A inflow and outflow—how many headquarters, and jobs connected to those headquarters, the state gained and lost within a year. Such data doesn’t seem to exist anymore. But there are plenty of examples indicating that we’re acquiring as many, if not more, companies than we’re spinning off or selling. Here are a few of the larger publicly known ones this year:
- UnitedHealth Group’s OptumHealth unit completed acquisitions that increased its assets by more than $7 billion; they now total $25.3 billion.
- 3M Co. acquired Scott Safety from Johnson Controls for $2 billion. Scott employs 1,500 people worldwide. 3M also spun off a few smaller businesses in recent years.
- H.B. Fuller agreed to acquire Royal Adhesives for $1.85 billion.
- Hormel agreed to acquire Columbus Manufacturing, a deli meat and salami company, for $850 million; Cidade do Sol, a value-added meats company in Brazil, for $104 million; and Fontanini Italian Meats and Sausages from Capitol Wholesale Meats, for $425 million. Those deals came after it spun off a few smaller business units last year.
- Entellus Medical agreed to acquire Spirox, a California-based maker of absorbable nasal implants, for $81 million.
- CJK Group, Brainerd, announced plans to acquire Webcrafters, a 270-employee, family-owned book manufacturing company in Madison, Wis.
- Online restaurant-delivery service BiteSquad reported it had acquired and integrated 17 restaurant delivery companies across the country, expanding its reach to 30 metro areas including Austin, Texas; Gainesville, Fort Myers and Tampa, Fla.; Honolulu; and Phoenix.
Meanwhile, there are dozens of significant employers throughout the state that have their headquarters elsewhere. Here, too, data is scarce to measure how much they mean to our economy compared with companies that are based here.
But such businesses show up when looking at a city’s “largest employers” list. In Rochester, for example, McNeilus Truck and Manufacturing is the area’s largest non-government employer, with 1,300 workers, after Mayo Clinic and IBM. It does such a good job of making the mixer units on cement trucks that it was purchased years ago by Oshkosh Corp. Charter Communications-owned Spectrum is next largest, with about 900 employees. Locally owned Kahler Hotels employs nearly 700, but right after it comes Crenlo Manufacturing, which was founded in 1951 and has been sold at least three times since. It employs about 600 people.
5 largest employers with headquarters located elsewhere
Yet Mayo Clinic, the Destination Medical Center project and IBM are what most of us think of in terms of the Rochester economy. These three are extremely important, but so, too, are all the smaller operations—and the fact that so many are not based in Minnesota.
We’ve talked with quite a few of the non-Minnesota-based businesses over the years; why keep operations here—why not consolidate in your home town, or with an operation in another state that is more business- and tax-friendly? Time and time again, the quality of our workforce is the No. 1 reason to operate here. Other reasons include the theater of seasons and unique mix of outstanding cultural amenities, restaurants, sports, entertainment and outdoor options.
I’m one of those who believes Minnesota still has a chance to land Amazon’s second headquarters for the reasons just mentioned, as well as our central location, excellent airport, solid transportation infrastructure and the possibility to partner with Target and/or Best Buy to better compete with others, especially Wal-Mart.
But even if that doesn’t happen, and businesses continue to locate their headquarters elsewhere, we still have everything that we have. And when you think about it, that’s a lot.