The Perils of Consolidating Businesses

How Consolidating Businesses Could Damage Your Business | BCBusiness
Merging businesses to build mass, build heft, carries risks for some and rewards for others.

Consolidating many small operations into a few big ones is an inevitable evolution in any industry. Today it’s happening in energy and online commerce. Now’s the time to prepare for it.

I noticed recently that Vancouver geothermal energy company Magma Energy and alt-energy company Plutonic Power merged to form a bigger, $600-million company called Alterra Power Corp.

The idea is, of course, to have bigger clout and a wider range of options in the alternative energy field.

Any energy project, whether alternative or traditional (i.e., oil or hydro) requires big dollars. Both were relative small fries in the scheme of things.

Also, both were based in B.C., which meant many of their projects would produce power that only had one customer: BC Hydro. Given the politicization that power company suffers from, it’s a dangerous case of under-diversification.

So they had to consolidate to build the mass, the heft required to gain access to alt-energy opportunities elsewhere.

And so it goes. Consolidation is inevitable most businesses.

It happened to newspapers more than a century ago. And it’s happening to them again today.

It happened to industry in the last century, as manufacturing consolidated in a few areas of the world.

It happened to retail when Walmart arrived and wiped out most of the mom and pop shops that had served customers for generations.

Among the latest industries to be hit is a relatively new one: online. A few large outfits like Amazon, Apple, Google and the bigger social media operations like LinkedIn and Facebook are consolidating web e-commerce.

Since most B.C. businesses are small, operate on the Web, and in that mom-and-pop category, consolidation is a trend worth watching.

It won’t happen overnight, but we now operate on Internet time. Many small e-commerce businesses could find themselves squeezed out sooner than they think.

Maybe it’s time to think now about where your Internet-based operation is headed in the next five years.