German shipping giant Hapag-Lloyd’s plan to hire more than 360 new people at a Gwinnett customer service center may seem like a standard foreign investment, but a deeper look shows it results in part from a shift in approach toward mergers and acquisitions in Georgia.
The deal is the latest and perhaps one of the most explicit examples of how decisions made in boardrooms half a world away can have dramatic effects on local workforces, especially in communities where foreign investors are among the largest employers.
Chastened by the recession, local economic developers are waking up to the opportunity implied in major international deals. Instead of threats, they now see inevitable shakeups as potential job creators — or savers — for their communities.
“Before, it was fear of the unknown. We were nervous about whether (companies) were going to leave. Now we embrace it and are as enthusiastic with M&A as we are with a new company choosing to be here or an existing company expanding,” said Nick Masino, chief economic development officer at Partnership Gwinnett.
Hapag-Lloyd provides a case study. The company late last year closed a more than $7 billion acquisition of United Arab Shipping Co., a shipping line formed by a consortium of Arab nations that had put a customer-service headquarters in Gwinnett, promising $10 million in investment and 160 jobs.
After the deal, Hapag-Lloyd decided the metro-area county was a great place to “centralize” many of its U.S. functions, resulting in an additional $5.5 million and 363 jobs in administration, technical support, customer service and other white-collar positions, said Hercules Angelatos, senior vice president for service centers in North America.
[pullquote]Decisions made in boardrooms half a world away can have dramatic effects on local workforces[/pullquote]
In other words, this logistics investment isn’t a big warehouse, but a nerve center that is key to the overall U.S. operation of a company that employs 12,000 globally over 394 offices in 127 countries.
“We are No. 5 in the world but we are striving to be No. 1 in quality,” Mr. Angelatos told Global Atlanta.
Besides the good weather and a favorable talent pool, the Hamburg-based company also saw Georgia as a generally supportive locale when reviewing United Arab’s existing operations for consolidation opportunities.
Pat Wilson, Georgia’s commissioner for economic development, said the state stops short of pairing buyers and sellers together or trying to lure them through a calculated M&A strategy.
“One of the things we will never do in a merger and acquisition is incentivize a company to move out of another community, but when they are consolidating whether across state lines or even internationally, we want them to look to Georgia first,” Mr. Wilson told Global Atlanta.
Post-recession, when more companies were using mergers to grow or enter the U.S. Georgia had to learn “on the fly” how it could best position itself to be helpful to employers his team considers Georgia companies, no matter where in the world their home base is, Mr. Wilson added.
“Being nimble and being able to support the companies that are in Georgia as they are going through that process is something I think that we’re better at than we were even eight years ago,” he said.
The state’s European office in Munich didn’t play a role in this deal, partly because Hapag-Lloyd had such a strong U.S. presence already. The company, which manages 1.6 million shipping containers, is also a key customer of the Georgia Ports Authority, which played a role in growing the overall relationship, Mr. Wilson said.
Mr. Masino said Gwinnett leaders were ready to get on a plane if needed. the county will visit the firm’s Hamburg headquarters during a European trade mission in May.
He credits the shift in thinking with the research on foreign investment that came out of the Brookings Institution’s Global Cities Initiative, which created both an export plan and a foreign investment strategy for the metro Atlanta area.
One big revelation was that economic developers could play a more positive role in an arena previously seen as threatening for communities.
“It’s revamped our strategy,” Mr. Masino said, noting that foreign companies in particular need help with seemingly mundane issues like finding schools for their kids and buying a home. That’s where organizations like his can help — and set their communities apart.
“Where we were reactionary before, we go in full force, and this is a great example,” he said of the Hapag-Lloyd deal.
The same sentiment was evident during a recent reception honoring foreign investors at the Mercedes-Benz USA headquarters in Sandy Springs.
ORBATL, the organization born out of the FDI research and driven by the Metro Atlanta Chamber, aims to “connect the dots” on foreign direct investment for the community, said David Balos, JPMorgan Chase‘s managing director for middle market in Georgia and Alabama, whose bank helped underwrite the research.
And merger activity is becoming increasingly important in that picture, with some 62 percent of metro-area jobs created by foreign investors housed in firms that practice M&A.
“Years ago we used to talk about it from a perspective of greenfield operations, people coming in and building plants, facilities and locating headquarters, but there is a lot more now that is being driven by acquisition activity,” he said.
The issue is talking about it — given how private many of these deals are, especially in the run-up to their announcement, Mr. Balos told an audience with trade representatives from 12 European embassies and 30 foreign companies with a local presence.
Mergers may not create jobs or result in major capital infusions, but they can still benefit communities.
“Even so, there can be substantial benefits of such transactions – knowledge of global markets, new technologies, innovative ideas, new financial resources that the new parent company brings to the regional business ecosystem, the FDI report reads in the “key finding” on mergers.
That’s why Mr. Balos told his audience it’s important to spread the message of Atlanta’s growth through their respective grapevines.
“We’re all biased in this room that I think the Atlanta metro region has the best asset complement around,” Mr. Balos said.