More Private, Less Public

Rick Brimacomb, whose Minneapolis-based Brimacomb & Associates advises early-stage companies, says that greater compliance costs under Sarbanes-Oxley are the biggest factor leading these companies to sell out rather than go public. He cites several other factors as well: fewer securities analysts covering smaller companies, plenty of buyers out there with lots of capital, and concern about the demands on public companies for short-term earnings performance.

Given all of this, don’t expect the ranks of public companies in Minnesota to start growing significantly anytime soon. Even if there should be a sustained rebound in IPOs, the newly public companies could be taken out quickly by mergers.

A few modest moves could help. Wisconsin, Iowa, and North Dakota offer angel investors an income tax credit for investing in start-ups. That could encourage fledgling companies to survive, grow, and eventually go public. But so far, proposals for such a credit have failed in the Minnesota Legislature.

While the search goes on for ways to enhance the state’s climate for entrepreneurism, the best course may be to recognize the decline in locally headquartered public companies and build other strengths. Regional or business-unit headquarters of international companies—Thomson Reuters’ Thomson West business in Eagan, the new U.S. headquarters of Denmark’s Coloplast in Minneapolis—bring direct-hire and support-service jobs into the local economy just as companies headquartered here do. Using the examples that are already here, maybe the state’s entities working on economic development could recruit more of the same.