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Tuesday, April 23, 2024

Clorox, Syneos turn back plans for N.C. incentives

 

While there’s lots of talk about new incentive deals to attract business to North Carolina, lately there’s been news about deals that have fallen through.

Recently, Clorox and Syneos Health have walked away from Job Development Investment Grants, with Clorox passing up the prospect of getting $2.2 million from the state and Syneos surrendering a potential $8.8 million.

It’s not particularly unusual for incentive deals to fall through.

Legislative analysts reported last month that of the JDIGs awarded from 2003 to 2023, only 10% resulted in a full payout.

Another 22% resulted in a partial payout. Companies pulled the plug on 3% and 20% “terminated with no funds disbursed.”

Both Clorox and Syneos cite the rise of remote-work culture as a contributing factor in being able to hit the targets set by the state.

“Even when considering a possible base period extension, we’ve come to the realization that current conditions preclude us from meeting the growth targets specified in our JDIG agreement,” Clorox Vice President David Green told the state.

That isn’t to say that the state’s recruiting efforts involving the two companies wound up falling flat.

Despite withdrawing from the JDIG program, Clorox exceeded its capital investment goal of $6.75 million by spending $4 million at its downtown Durham office and $9 million to expand its research and development building. Clorox employs 520 full-time workers in Durham, exceeding its original base employment level of 485 full-time employees.

When the deal was announced, Clorox said it would establish a new research and development facility and expand corporate operations in Durham County for its Better Health and Burt’s Bees divisions. The Oakland, Calif.-based company is in the Fortune 500 and has a market cap of about $18.7 billion.

Green attributed the inability to meet its JDIG employment-growth to a changing  strategy related to its vitamins, minerals and supplements business.

Meanwhile, private equity groups Elliott Investment Management, Patient Square Capital, and Veritas Capital bought Morrisville-based Syneos for $7.1 billion in 2023. The company acknowledges that it’s seen a decline in staffing. Chief Accounting Officer Donna Kralowetz told state officials the company has 2,077 employees, 100 fewer than at the end of 2022.

For its 2016 JDIG, Syneos had said it would create 495 jobs in Wake County and retain more than 2,080 positions. It received $874,000 from the state for reaching 2018 and 2019 job targets.

“We genuinely appreciate the cooperation and guidance we have received throughout the duration of the agreement,” Kralowetz said. “However, due to unforeseen changes in market conditions and most notably the evolution of the work from home landscape, we have had to reevaluate our ability to meet our requirements as initially agreed to in our JDIG agreement.”

The company has a lease on its 258,000-square-foot headquarters in Morrisville through 2032, Kralowetz wrote.

Since 2018, Syneos has invested approximately $12.5 million in leasehold improvements and office equipment related to the headquarters, not including an additional $1.8 million of costs incurred for the upfits related to the building during 2023, she noted.

Syneos company does contract research on new drugs.

Other companies, including Raleigh-based Bandwidth, have also recently dropped out of the state incentive plan due to slow or declining employee growth.

Companies that get incentive deals get paid based on performance, so the money doesn’t leave the state’s coffers until the promised jobs and investment occur.

 

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